SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 25, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-4663
Crompton & Knowles Corporation
(exact name of registrant as specified in its charter)
Massachusetts 04-1218720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Station Place, Metro Center
Stamford, Connecticut 06902
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203)353-5400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $0.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
The aggregate market value of the voting stock held by non-
affiliates of the registrant, computed as of February 11, 1994, was
$1,113,975,000.
The number of shares of Common Stock of the registrant
outstanding as of February 11, 1994 was 51,306,868.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for
fiscal year ended December 25, 1993...........Parts I, II and IV
Proxy Statement for Annual Meeting
of Stockholders on April 12, 1994 ............Part III
CROMPTON & KNOWLES CORPORATION
FORM 10-K
For the Fiscal Year Ended December 25, 1993
PART I
Item 1. Business
General
The Registrant, Crompton & Knowles Corporation (sometimes
hereinafter referred to as the "Corporation"), was incorporated in
Massachusetts in 1900. The Corporation has engaged in the
manufacture and sale of specialty chemicals since 1954 and, since
1961, in the manufacture and sale of specialty process equipment
and controls. The Corporation expanded its specialty chemical
business in 1988 with the acquisitions of Ingredient Technology
Corporation, a leading supplier of ingredients for the food and
pharmaceutical industries, and Townley Dyestuffs Auxiliaries
Company, Ltd., one of the largest independent suppliers of dyes for
Great Britain's textile and paper industries. The Corporation made
two acquisitions in calendar year 1990, acquiring the business and
certain assets and liabilities of Atlantic Industries, Inc., a
domestic dye manufacturer, and APV Chemical Machinery, Inc., which
manufactured the Sterling line of extruders, extrusion systems and
industrial blow molding equipment for the plastics industry. In
1991, the Corporation acquired a wire and cable equipment business
from Clipper Machines, Inc. In 1992, the Corporation acquired a
pre-metallized dyes business and facility located in Oissel,
France.
Information as to the sales, operating profit, and
identifiable assets attributable to each of the Corporation's
business segments during each of its last three fiscal years is set
forth in the Notes to Consolidated Financial Statements on page 24
of the Corporation's 1993 Annual Report to Stockholders, and such
information is incorporated herein by reference.
Products and Services
The principal products and services offered by the Corporation are
described below.
SPECIALTY CHEMICALS
Textile dyes manufactured and sold by the Corporation are used
on both synthetic and natural fibers for knit and woven garments,
home furnishings such as carpets, draperies, and upholstery, and
automotive furnishings including carpeting, seat belts, and
upholstery. Industrial dyes and chemicals are marketed to the
paper, leather, and ink industries for use on stationery, tissue,
towels, shoes, apparel, luggage, and other products and for
transfer printing inks. The Corporation also markets organic
chemical intermediates and a line of chemical auxiliaries for the
textile industry, including leveling agents, dye fixatives, and
scouring agents. Sales of this class of products accounted for
57%, 59%, and 57% of the total revenues of the Corporation in 1993,
1992, and 1991, respectively.
The Corporation manufactures and sells reaction and compounded
flavor ingredients for the food processing, bakery, beverage and
pharmaceutical industries; colors certified by the Food & Drug
Administration for sale to domestic producers of food and
pharmaceuticals; inactive ingredients for the pharmaceutical
industry; and fragrance formulations used in personal care and
household products. The Corporation is also a leading supplier of
specialty sweeteners, including edible molasses, molasses blends,
malt extracts, and syrups for the bakery, confectionery and food
processing industries and a supplier of seasonings and seasoning
blends for the food processing industry. Sales of this class of
products accounted for 16%, 17%, and 19% of the total revenues of
the Corporation in 1993, 1992, and 1991, respectively.
SPECIALTY PROCESS EQUIPMENT AND CONTROLS
The Corporation, through its Davis-Standard Division,
manufactures and sells plastics and rubber extrusion equipment,
industrial blow molding equipment, electronic controls, and
integrated extrusion systems and offers specialized service and
modernization programs for in-place extrusion systems. Sales of
this class of products accounted for 27%, 24%, and 24% of the total
revenues of the Corporation in 1993, 1992, and 1991, respectively.
Integrated extrusion systems, which include extruders in
combination with controls and other accessory equipment, are used
to process plastic resins and rubber into various products such as
plastic sheet used in appliances, automobiles, home construction,
sports equipment, and furniture; blown film used to package many
consumer products; and extruded shapes used as house siding,
furniture trim, and substitutes for wood molding. Integrated
extrusion systems are also used to compound engineered plastics, to
recycle and reclaim plastics, and to apply plastic or rubber
insulation to high voltage power cable for electrical utilities and
to wire for the communications, construction, automotive, and
appliance industries.
Industrial blow molding equipment produced by the Corporation
is sold to manufacturers of non-disposable plastic parts such as
tool cases and beverage coolers.
The Corporation's HES unit produces electrical and electronic
controls primarily for use with extrusion systems. The Davis-
Standard Division is a major user of such controls.
Sources of Raw Materials
Chemicals, steel, castings, parts, machine components, edible
molasses, spices, and other raw materials required in the
manufacture of Crompton & Knowles' products are generally available
from a number of sources, some of which are foreign. Significant
sales of the dyes and auxiliary chemicals business consist of dyes
manufactured from intermediates purchased from foreign sources.
Patents and Licenses
Crompton & Knowles owns patents, trade names, and trademarks
and uses know-how, trade secrets, formulae, and manufacturing
techniques which assist in maintaining the competitive position of
certain of its products. Patents, formulae, and know-how are of
particular importance in the manufacture of a number of the dyes
and flavor ingredients sold in the Corporation's specialty
chemicals business, and patents and know-how are also significant
in the manufacture of certain wire insulating and plastics
processing machinery product lines. The Corporation believes that
no single patent, trademark, or other individual right is of such
importance, however, that expiration or termination thereof would
materially affect its business. The Corporation is also licensed
to use certain patents and technology owned by foreign companies to
manufacture products complementary to its own products, for which
it pays royalties in amounts not considered material to the
consolidated results of the enterprise. Products to which the
Corporation has such rights include certain dyes and plastics
machinery.
Seasonal Business
No material portion of any segment of the business of the
Corporation is seasonal.
Customers
The Corporation does not consider any segment of its business
dependent on a single customer or a few customers, the loss of any
one or more of whom would have an adverse effect on the segment.
No one customer's business accounts for more than ten percent of
the Corporation's gross revenues nor more than ten percent of its
earnings before taxes.
Backlog
Because machinery production schedules range from about 60
days to 10 months, backlog is important to Crompton & Knowles'
specialty process equipment and controls business. Firm backlog of
customers' orders at December 25, 1993, for this business, totalled
approximately $38 million compared with $33.8 million at December
26, 1992. It is expected that most of the December 25, 1993,
backlog will be shipped during 1994. Orders for specialty
chemicals and equipment repair parts are filled primarily from
inventory stocks and thus are excluded from backlog.
Competitive Conditions
Crompton & Knowles is among the largest suppliers of dyes in
the United States and is a leading domestic producer of specialty
dyes for nylon, polyester, acrylics, and cotton. The Corporation
is less of a factor in other segments of the domestic dyes industry
and in the European market. The Corporation is also a major United
States and Canadian supplier of edible molasses, a major United
States supplier of malt extracts, and a significant supplier of
other sugar-based specialty products. As a supplier of flavors and
seasonings, the Corporation has many competitors in the United
States and abroad.
Crompton & Knowles is a leading producer of extrusion
machinery for the plastics industry and a leading domestic producer
of industrial blow molding equipment and competes with domestic and
foreign producers of such products. The Corporation is one of a
number of producers of other types of plastics processing
machinery.
Product performance, service, and competitive prices are all
important factors in competing in the specialty chemicals and
specialty process equipment and controls product lines. No one
competitor or small number of competitors is believed to be
dominant in any of the Corporation's major markets.
Research and Development
Crompton & Knowles employs about 240 engineers, draftsmen,
chemists, and technicians responsible for developing new and
improved chemical products and process equipment systems for the
industries served by the Corporation. Often, new products are
developed in response to specific customer needs. The
Corporation's process of developing and commercializing new
products and product improvements is ongoing and involves many
products, no one of which is large enough to significantly impact
the Corporation's results of operations from year to year.
Research and development expenditures totalled $11.2 million for
the year 1993, $10.1 million for the year 1992 and $9.7 million for
the year 1991.
Environmental Matters
The Corporation's manufacturing facilities are subject to
various federal, state and local requirements with respect to the
discharge of materials into the environment or otherwise relating
to the protection of the environment. Although precise amounts are
difficult to define, in 1993, the Corporation spent approximately
$13.0 million to comply with those requirements, including
approximately $4.1 million in capital expenditures.
The Corporation has been designated, along with others, as a
potentially responsible party under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, or comparable
state statutes, at two waste disposal sites; and two inactive
subsidiaries have been designated, along with others, as
potentially responsible parties at a total of four other sites.
While the cost of compliance with existing environmental
requirements is expected to increase, based on the facts currently
known to the Corporation, management expects that those costs,
including the cost to the Corporation of remedial actions at the
waste disposal sites where it has been named a potentially
responsible party, will not have a material effect on the
Corporation's liquidity and financial condition and that the cost
to the Corporation of any remedial actions will not be material to
the results of the Corporation's operations in any given year.
Employees
The Corporation had 2,352 employees on December 25, 1993.
Financial Information Concerning Foreign Operations and Export
Sales
The information with respect to sales, operating profit, and
identifiable assets attributable to each of the major geographic
areas served by the Corporation and export sales, for each of the
Corporation's last three fiscal years, set forth in the Notes to
Consolidated Financial Statements on page 24 of the Corporation's
1993 Annual Report to Stockholders, is incorporated herein by
reference.
The Corporation considers that the risks relating to
operations of its foreign subsidiaries are comparable to those of
other U.S. companies which operate subsidiaries in developed
countries. All of the Corporation's international operations are
subject to fluctuations in the relative values of the currencies in
the various countries in which its activities are conducted.
Item 2. Properties
The following table sets forth information as to the
principal operating properties of the Corporation and its
subsidiaries:
Ownership
Business Segment Dates or Lease
and Location Products Built Expiration
Specialty Chemicals:
Carrollton, TX Seasonings 1982 1994
office and plant
Des Plaines, IL Flavors and 1968 Owned
office and plant fragrances
Elyria, OH Seasonings 1978 2001
office and plant
Gibraltar, PA Textile and other 1964-
office, laboratory dyes 1980 Owned
and chemical plant
Lowell, NC Textile dyes,
chemical plant organic chemicals 1961 Owned
Mahwah, NJ Flavors, 1984- 1999
office, laboratory fragrances, 1989
seasonings and
color dispersions
Newark, NJ Textile dyes, 1949-
chemical plant organic chemicals 1985 Owned
Nutley, NJ Textile and 1949-
office, laboratory, other dyes 1977 Owned
and chemical plant
Oissel, France Textile and 1946- Owned
office, laboratory other dyes 1992
and chemical plant
Pennsauken, NJ Food and 1975 1994
office and plant pharmaceutical
ingredients
Reading, PA Textile dyes, 1910-
chemical plant organic chemicals, 1979 Owned
and food colors
Tertre, Belgium Textile and
office, laboratory, other dyes 1970 Owned
and chemical plant
Specialty Process Equipment
and Controls:
Edison, NJ Blow Molding and 1974- 1995
office and extrusion 1979
machine shop equipment
Pawcatuck, CT Plastics and 1965-
office and machine rubber extrusion 1985 Owned
shop and electronic
control equipment
and systems
Pawcatuck, CT Extrusion 1968 1996
office, machine systems
shop and warehouse
All plants are built of brick, tile, concrete, or sheet metal
materials and are of one-floor construction except parts of the
plants located in Reading and Gibraltar, Pennsylvania, Nutley, New
Jersey, Oissel, France and Tertre, Belgium. All are considered to
be in good operating condition, well maintained, and suitable for
the Corporation's requirements.
Item 3. Legal Proceedings
Kem Manufacturing Corporation ("Kem"), a wholly-owned
subsidiary of the Corporation acquired in 1976, has been named,
along with others, a potentially responsible party under the New
Jersey Spill Compensation and Control Act by the New Jersey
Department of Environmental Protection and Energy with respect to
the Evor Phillips waste disposal site located in central New
Jersey. It appears that Kem held title to the site between 1970
and 1974, prior to the acquisition of Kem by the Corporation, but
that Kem did not own or operate any facility at the site. Based on
the facts currently known to the Corporation, the Corporation does
not believe that the cost to the Corporation of any remedial
actions at the site will have a material effect on the
Corporation's liquidity and financial condition or the results of
the Corporation's operations in any given year.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
report.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The information concerning the range of market prices for
the Corporation's Common Stock on the New York Stock Exchange and
the amount of dividends paid thereon during the past two years, set
forth in the Notes to Consolidated Financial Statements on page 23
of the Corporation's 1993 Annual Report to Stockholders, is
incorporated herein by reference.
The number of registered holders of Common Stock of the
Corporation on December 25, 1993 was 3,973.
Item 6. Selected Financial Data
The selected financial data for the Corporation for each of
its last five fiscal years, set forth under the heading "Eleven
Year Selected Financial Data" on pages 26 and 27 of the
Corporation's 1993 Annual Report to Stockholders, is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's discussion and analysis of the Corporation's
financial condition and results of operations, set forth under the
heading "Management's Discussion and Analysis" on pages 10 through
13 of the Corporation's 1993 Annual Report to Stockholders, is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements of the Corporation, notes thereto,
and supplementary data, appearing on pages 14 through 25 of the
Corporation's 1993 Annual Report to Stockholders, are incorporated
herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information called for by this Item concerning directors of
the Corporation is included in the definitive proxy statement for
the Corporation's Annual Meeting of Stockholders to be held on
April 12, 1994, which has been filed with the Commission pursuant
to Regulation 14A, and such information is incorporated herein by
reference.
The executive officers of the Corporation are as follows:
Vincent A. Calarco, age 51, has served as President and
Chief Executive Officer of the Registrant since 1985 and Chairman
of the Board since 1986. He is former Vice President for Strategy
and Development, Uniroyal, Inc. (1984-1985), and former President
of Uniroyal Chemical Company (1979-1984). Mr. Calarco has been a
member of the Board of Directors of the Registrant since 1985. Mr.
Calarco also serves as a director of Caremark International Inc.
and J.M. Huber Corporation.
Robert W. Ackley, age 52, has served as a Vice President of
the Registrant since 1986 and as President of the Registrant's
Davis-Standard Division since 1983.
Peter Barna, age 50, has served as Treasurer of the
Registrant since 1980 and as Principal Accounting Officer since
1986.
John T. Ferguson, II, age 47, has served as Chief Legal
Officer and Secretary of the Registrant since 1989.
Nicholas Fern, Ph.D., age 50, has served as President of the
Registrant's International Dyes and Chemicals Division since 1992,
and as Managing Director of Crompton & Knowles Europe, S.A.
(formerly Crompton & Knowles Tertre) since 1978.
Edmund H. Fording, Jr., age 57, has served as Vice President
of the Registrant since 1991 and as President of the Registrant's
Dyes and Chemicals Division since 1989. He is the former General
Manager of the Dyes Division of Hilton Davis Co. (1988-1989) and
Director of the Organic Department of Mobay Corporation
(1980-1988).
Marvin H. Happel, age 54, has served as Vice President -
Organization of the Registrant since 1986. He is the former
Director of Human Resources of Uniroyal Chemical Company
(1979-1986).
Charles J. Marsden, age 53, has served as Vice President -
Finance and Chief Financial Officer and as a member of the Board of
Directors of the Registrant since 1985.
Frank H. Schoonyoung, age 51, has served as President of the
Corporation's Ingredient Technology Division since July 1992. He
is the former Vice President and General Manager of Universal
Flavors - U.S.A., Inc. (1990-1992) and Senior Vice President and
Director, Flavor Division, Fritzsche Dodge & Olcott, a unit of BASF
K&F Corporation (1965-1990).
The term of office of each of the above-named executive
officers is until the first meeting of the Board of Directors
following the next annual meeting of stockholders and until the
election and qualification of his successor.
There is no family relationship between any of such
officers, and there is no arrangement or understanding between any
of them and any other person pursuant to which any such officer was
selected as an officer.
Item 11. Executive Compensation
Information called for by this Item is included in the
definitive proxy statement for the Corporation's Annual Meeting of
Stockholders to be held on April 12, 1994, which has been filed
with the Commission pursuant to Regulation 14A, and such
information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information called for by this Item is included on page 5 of
the definitive proxy statement for the Corporation's Annual Meeting
of Stockholders to be held on April 12, 1994, and such information
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information called for by this Item is included in the
definitive proxy statement for the Corporation's Annual Meeting of
Stockholders to be held on April 12, 1994, and such information is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) The following documents are filed as a part of this report:
1. The financial statements and financial statement schedules
listed in the Index on page F-1 of Exhibit 27 hereof.
2. The Exhibits listed in paragraph (c), below.
(b) There were no reports on Form 8-K filed during the last
quarter of the period covered by this report.
(c) The following Exhibits are either filed with this report on
Form 10-K or incorporated herein by reference to the respective
reports and registration statements of the Registrant identified in
the parenthetical clause following the description of the Exhibit:
Exhibit Description Sequential
No. of Exhibit Page No.
3(i) Restated Articles of Organization of the Corp-
oration filed with the Commonwealth of
Massachusetts on October 27, 1988, as amended
on April 10, 1990 and on April 14, 1992.
(Exhibit 3(a) to Form 10-K for the fiscal year
ended December 26, 1992.) --
3(ii) By-laws of the Corporation as amended to date.
(Exhibit 3(b) to Form 10-K for the fiscal year
ended December 30, 1989.) --
4(a)(1) Rights Agreement dated as of July 20, 1988,
between the Registrant and The Chase Manhattan
Bank, N.A., as Rights Agent. (Exhibit 1 to
Form 8-K dated July 29, 1988.) --
4(a)(2) Agreement dated as of March 28, 1991, amending
Rights Agreement dated as of July 20, 1988,
between the Registrant and The Chase Manhattan
Bank, N.A., as Rights Agent. (Exhibit 4(i)(i)
to Form 10-K for the fiscal year ended
December 29, 1990.) --
4(b) Credit Agreement dated as of September 28, 1992,
among the Registrant, five banks, and Bankers Trust
Company as Agent. (Exhibit 10.1 to Registration
Statement No. 33-52642 on Form S-3.)
(Other instruments defining the rights of holders
of long-term debt of the Registrant are not being filed
herewith pursuant to the provisions of Instruction 4(iii)
to Item 601 of Regulation S-K. The Registrant agrees to
furnish a copy of any such instrument to the Commission
upon request.)
**10(a) 1983 Stock Option Plan of Crompton & Knowles
Corporation, as amended through April 14, 1987.
(Exhibit 10(c) to Form 10-Q for the quarter ended
March 28, 1987.) --
**10(b) 1977 Stock Option Plan of Crompton & Knowles
Corporation, as amended. (Exhibit 28(b) to
Registration Statement No. 2-83339 on Form S-8.) --
**10(c) Amendments to Crompton & Knowles Corporation
Stock Option Plans adopted February 22, 1988.
(Exhibit 10(d) to Form 10-K for the fiscal
year ended December 26, 1987.) --
**10(d) Amended Annual Incentive Compensation Plan
* for "A" Group of Senior Executives dated January
24, 1994. --
**10(e) Summary of Management Incentive Bonus Plan for
selected key management personnel. (Exhibit 10(m)
to Form 10-K for the fiscal year ended December 27,
1980.) --
**10(f) Supplemental Medical Reimbursement Plan. (Exhibit
10(n) to Form 10-K for the fiscal year ended
December 27, 1980.) --
**10(g) Supplemental Dental Reimbursement Plan. (Exhibit
10(o) to Form 10-K for the fiscal year ended
December 27, 1980.) --
**10(h) Employment Agreement dated February 22, 1988,
between the Registrant and Vincent A. Calarco.
(Exhibit 10(j) to the Form 10-K for the fiscal year
ended December 26, 1987.) --
**10(i) Form of Employment Agreement entered into in
1988, 1989 and 1992 between the Registrant and
seven of its executive officers. (Exhibit 10(k) to
Form 10-K for the fiscal year ended December 26,
1987.) --
**10(j) Amended Supplemental Retirement Agreement dated
* October 20, 1993 between the Registrant and
Vincent A. Calarco. --
**10(k) Form of Amended Supplemental Retirement Agreement
* dated October 20, 1993 between the Registrant
and three of its executive officers. --
**10(l) Supplemental Retirement Agreement Trust
* Agreement dated October 20, 1993 between the
Registrant and Shawmut Bank, N.A. --
**10(m) Amended Benefit Equalization Plan dated
* October 20, 1993. --
**10(n) Amended Benefit Equalization Plan Trust Agreement
* dated October 20, 1993 by and between the
Registrant and Shawmut Bank, N.A. --
**10(o) Amended 1988 Long Term Incentive Plan. --
*
10(p) Trust Agreement dated as of May 15, 1989, by and
between the Registrant and Shawmut Worcester
County Bank, N.A. and First Amendment thereto
dated as of February 8, 1990. (Exhibit 10(w)
to Form 10-K for the fiscal year ended December 30,
1989.) --
**10(q) Form of 1989 - 1991 Long Term Performance Award
Agreement (as amended). (Exhibit 10(x) to Form
10-K for the fiscal year ended December 30, 1989.) --
**10(r) Form of 1992 - 1994 Long Term Performance Award
Agreement. (Exhibit 10(y) to Form 10-K for the
fiscal year ended December 28, 1991.) --
**10(s) Crompton & Knowles Corporation Restricted Stock Plan
for Directors approved by the stockholders on April
9, 1991. (Exhibit 10(z) to Form 10-K for the fiscal
year ended December 28, 1991.) --
10(t) Share Purchase Agreement dated as of April 30, 1992
between Crompton & Knowles Europe, S.A., a subsidiary
of the Registrant, and Imperial Chemical Industries
PLC. (Exhibit 10(z) to Form 10-K for the fiscal
year ended December 26, 1992.) --
**10(u) 1993 Stock Option Plan for Non-Employee Directors __
*
*11 Statement re computation of per share earnings. --
*13 1993 Annual Report to Stockholders of Crompton &
Knowles Corporation. (Not to be deemed to be filed
with the Securities and Exchange Commission except
for those portions thereof which are expressly
incorporated by reference into this report on
Form 10-K.) --
21 Subsidiaries of the Registrant. (Exhibit 22 to Form
10-K for the fiscal year ended December 26, 1992.) --
*23 Consent of independent auditors.
*24 Power of attorney from directors and executive
officers of the Registrant authorizing signature of
this report. (Original on file at principal executive
offices of Registrant.)
*27 Financial Statements and Financial Statement Schedules.
*29 Annual Report on Form 11-K of Crompton & Knowles
Corporation Employee Stock Ownership Plan for
the fiscal year ended December 31, 1993.
*Copies of these Exhibits are annexed to this report on Form 10-K
provided to the Securities and Exchange Commission and the New York
Stock Exchange.
**This Exhibit is a compensatory plan, contract or arrangement in
which one or more directors or executive officers of the Registrant
participate.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CROMPTON & KNOWLES CORPORATION
(Registrant)
Date: March 25, 1994 By: /s/ Charles J. Marsden
Charles J. Marsden,
Vice President-Finance
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the date
indicated.
Name Title
Vincent A. Calarco* Chairman of the Board, President,
and Director (Principal Executive
Officer)
Charles J. Marsden* Vice President-Finance and
Director (Principal Financial
Officer)
Peter Barna* Treasurer (Principal Accounting
Officer)
James A. Bitonti* Director
Harry W. Buchanan* Director
Robert A. Fox* Director
Roger L. Headrick* Director
Leo I. Higdon, Jr.* Director
Michael W. Huber* Director
Warren A. Law* Director
C. A. Piccolo* Director
Howard B. Wentz, Jr. * Director
Date: March 25, 1994 *By: /s/ Charles J. Marsden
Charles J. Marsden,
as attorney-in-fact
EXHIBIT 10 (d)
CROMPTON & KNOWLES CORPORATION 1/24/94
Annual Incentive Compensation Plan
For "A " Group of Senior Executives
1. PURPOSE. The purpose of the Crompton & Knowles
Corporation Annual Incentive Compensation Plan for the "A" Group of
Senior Executives ("the Plan") is to provide incentives for senior
management tied directly to the Company's return on resources used
in the business.
2. EFFECTIVE DATE OF THE PLAN. The Plan amends and
supercedes the current Incentive Plan for Crompton & Knowles
Executives -- Group A in its entirety. The Plan shall become
effective upon its approval by the Committee on Executive
Compensation with the concurrence of the Board of Directors,
commencing with the Company's 1987 fiscal year.
3. ADMINISTRATION. The Plan shall be administered by
the Committee on Executive Compensation (the "Committee") of the
Board of Directors of the Company consisting of not less than three
non-employee directors who are deemed to be "disinterested" under
Section 16 of the Securities Exchange Act of 1984. Subject to the
provisions of the Plan, the Committee shall be authorized to
interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan, and to make all other
determinations necessary or advisable for the administration of the
Plan. The determinations of the Committee in the administration of
the Plan, as described herein, shall be final and conclusive.
4. ELIGIBILITY. Selected senior management executives
of the Company may be deemed eligible for awards under the Plan.
As of the date of adoption of the Plan, only the Chairman and Chief
Executive Officer is eligible, but other executives may be added at
any time and from time to time at the discretion of the Committee.
5. ANNUAL INCENTIVE POOL DETERMINATION. A pool of
funds calculated as a percent of pre-tax income of the Company will
be available for awards each year under the Plan, based on the
Company's financial performance. The initial financial measure
used to gauge performance will be after-tax net income of the
Company as a percent of average common equity as reported to
shareholders, or Return on Equity.
Pre-tax income shall mean the Company's income as
reported to shareholders before provisions for Federal, state and
local income taxes and before accruals for this Plan. The schedule
to be used to calculate the award pool for the Chairman and Chief
Executive Officer is shown in the following table (interpolation
shall be used between the points for interim levels of
performance):
Return on Equity - % of Pre-Tax Income for "A" Fund
Less than 15.0% - 0%
15.0 - .30
16.5 - .50
18.0 - .75
19.5 - 1.00
21.0 - 1.25
22.5 or More - 1.50
If other participants are later added to the Plan,
the "A" Fund will be increased to accommodate their awards, and if
participants are subsequently removed from the Plan, the "A" Fund
will be reduce, in either case as determined by the Committee. In
any year, the Committee shall have the authority to adjust the
schedule and/or to adopt another performance measure if it is
deemed appropriate.
6. AWARD DETERMINATION. As soon as practicable after
the end of each fiscal year of the Company, the Committee shall
approve incentive award payments to participants from the incentive
pool based on the Company's financial results for such year as
reported to its shareholders. Payments of approved amounts will
not be made until after the final earnings have been satisfactorily
reviewed by the outside auditors. The Committee may adjust results
for extraordinary events and may adjust awards for individual
performance. The Committee shall not be obligated to pay out all
of the award pool for any fiscal year. In no event shall the bonus
to be paid to a participant in any one year exceed $650,000 or 100%
of the participant's base salary for such year, whichever is the
lesser amount. Awards will be paid in cash as soon as practicable
following year end.
7. MISCELLANEOUS PROVISIONS. The following
miscellaneous provisions are applicable to this Plan:
(a) Participation in the Plan does not guarantee
continued employment of any participant with
the Company;
(b) Plan payments will be added to a
participant's salary for purpose of computing benefits
under the Company's life insurance plan, its Individual
Account Retirement Plan, and its Employee
Stock Purchase and Savings Plan;
(c) The Company will have the right to withhold
taxes as required by law from any payments
under the Plan.
8. AMENDMENT OR TERMINATION. The Committee shall have
the authority to amend, suspend, or terminate any or all provisions
of the Plan at any time.
AMENDED EXHIBIT 10 (j)
SUPPLEMENTAL RETIREMENT AGREEMENT
AMENDMENT dated as of October 20, 1993 to the Supplemental
Retirement Agreement dated as of April 1, 1985 (the "Agreement") by
and between Vincent A. Calarco of Woodbridge, Connecticut (the
"Employee") and Crompton & Knowles Corporation, a Massachusetts
corporation (the "Corporation").
WITNESSETH:
WHEREAS, the Employee and the Corporation wish to make certain
changes in the Agreement and to restate the Agreement, as
previously amended and as amended hereby, in the form of this
Amended Supplemental Retirement Agreement;
NOW, THEREFORE, the Employee and the Corporation hereby agree
that the Agreement as previously amended shall be restated in its
entirety to read as follows:
I. The Corporation has entered into this contract to induce
the Employee to enter its employment, recognizing that in the case
of a limited number of key executive employees to whom similar
contracts may be offered the ordinary retirement benefits provided
under the Corporation's retirement system do not afford sufficient
incentive in terms of economic security, when compared with
retirement arrangements available from other prospective employers
who have been, are, or may be competing for their services.
However, nothing herein shall be deemed a contract of employment
for any minimum fixed term, or to restrict the freedom of the
Corporation or the Employee to terminate the employment
relationship between them at any time.
II. In the event this contract has been executed before
either or both such conditions have been fulfilled, it is
expressly agreed that the Employee shall be entitled to no
benefits by reason of this Agreement unless and until he shall have
completed five (5) years of continuous employment by the
Corporation (all references herein to the Corporation to be deemed
to include any subsidiary, which shall be defined as meaning any
corporation of which this Corporation owns all of the voting stock)
and shall have attained forty-five (45) years of age.
III. For the purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Normal Retirement Date" shall mean the first day
of the month on or next after the Employee's sixty-fifth
(65th) birthday.
(b) "Compensation" shall mean all of the Employee's
cash compensation for a calendar year, including salary, any
amount contributed by the Employee to a cash or deferred plan
under Section 401(k) of the Internal Revenue Code of 1986, as
amended, and any incentive compensation award or bonus with
respect to such year (even if paid in a
subsequent year), but excluding any incentive compensation
award or bonus paid during such year with respect to a prior
year and extraordinary earnings such as insurance costs or
gains on exercise of stock options.
(c) "Actuarial Equivalent" shall mean an amount of
equivalent value computed on the basis of the actuarial
assumptions used from time to time by the actuarial consultants
employed by the Corporation in connection with its employee benefit
plans, but using an interest assumption which is not less than the
Pension Benefit Guaranty Corporation interest assumption in effect
at the beginning of the month as of which the
computation is made.
(d) "Cause" shall mean (i) the Employee's willful and
continued failure to substantially perform assigned duties with the
Corporation (other than any such failure resulting from incapacity
due to physical or mental illness or any such actual or anticipated
failure resulting from termination for Good
Reason), after a demand for substantial performance is delivered to
the Employee by the Board of Directors of the Corporation,
specifically identifying the manner in which the Board believes
that the duties have not been substantially performed, or
(ii) the Employee's willful conduct which is demonstrably and
materially injurious to the Corporation. For purposes of this
sub-paragraph (d), no act, or failure to act, shall be considered
"willful" unless done, or omitted to be done, not in good faith and
without reasonable belief that such action or omission was in the
best interest of the Corporation.
(e) "Good Reason" shall mean (i) the assignment to the
Employee of any duties inconsistent in any respect with the
Employee's position (including status, offices, titles, and
reporting requirements), authority, duties, or responsibilities as
contemplated by any Employment Agreement between the Employee and
the Corporation, or any other action by the Corporation which
results in a diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and inadvertent
action which is remedied by the Corporation promptly after
receipt of notice thereof given by the Employee; (ii) any failure
by the Corporation to comply with any of the provisions of any
Employment Agreement between the Employee and the Corporation,
other than an insubstantial and inadvertent failure which is
remedied by the Corporation promptly after receipt of notice
thereof given by the Employee; (iii) any change not concurred in by
the Employee in the location of the office at which the
Employee is principally based, except for travel reasonably
required in the performance of the Employee's responsibilities and
substantially consistent with prior business travel
obligations of the Employee; or (iv) any purported termination by
the Corporation of the Employee's employment otherwise than as
permitted by any Employment Agreement between the Employee and the
Corporation.
(f) "Change in Control" shall mean a change in control of the
Corporation of a nature that would be required to be reported in
response to Item 1(a) of the Current Report on Form 8-K, as in
effect on January 1, 1988, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); provided
that, without limitation, such a "Change in Control" shall be
deemed to have occurred if: (i) a third person, including a
"group" as such term is used in Section 13(d)(3) of the Exchange
Act, other than the trustee of any employee benefit plan of the
Corporation, becomes the beneficial owner, directly or
indirectly, of 20% or more of the combined voting power of the
Corporation's outstanding voting securities ordinarily having the
right to vote for the election of directors of the Corporation;
(ii) during any period of 24 consecutive months individuals who, at
the beginning of such consecutive 24-month period, constitute the
Board of Directors of the Corporation (the "Board" generally and,
as of the date of this Agreement, the "Incumbent Board") cease for
any reason (other than retirement upon reaching normal retirement
age, disability, or death) to constitute at least a majority of the
Board; provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Corporation's shareholders, was
approved by a vote of at least three quarters of the directors
comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest
relating to the election of the Directors of the Corporation, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent
Board; or (iii) the Corporation shall cease to be a publicly owned
corporation having its outstanding Common Stock listed on the New
York Stock Exchange or quoted in the NASDAQ National Market System.
(g) "Projected Compensation" shall mean (i) for any
calendar year throughout which the Employee is employed by the
Corporation, his Compensation (as defined in paragraph 3(b) hereof)
for such year, and (ii) for any calendar year during or after which
his employment has been terminated, the compensation the Employee
would have received for such year if he had received (A) salary at
a rate determined by projecting his annual rate of salary at the
end of the last full calendar year of his
employment forward at a rate equal to 5% in excess of the annual
percentage change in the Consumer Price Index as published by the
U.S. Bureau of Labor Statistics for such year and (B) a bonus
equal to 40% of his salary as thus projected.
IV. If, prior to his Normal Retirement Date, the Employee
shall voluntarily terminate his employment with the Corporation
without Good Reason or his employment shall be terminated by the
Corporation for Cause, he shall thereby forfeit all rights and
benefits under this Agreement. If the employment of the Employee
shall be terminated on or after his Normal Retirement date, or if,
prior to that date but after the conditions of paragraph 2 hereof
have been satisfied, the Employee shall voluntarily
terminate his employment for Good Reason or his employment shall be
terminated by the Corporation without Cause, this Agreement shall
continue in full force and effect, and the Employee shall become
entitled to the rights and benefits hereinafter set forth upon the
occurrence of the events respectively giving rise
thereto.
V. If the Employee shall remain in employment by the
Corporation until and shall reach his Normal Retirement Date, he
shall be entitled to receive a supplemental retirement benefit
under this Agreement which shall be at an annual rate equal to the
amount by which
(a) fifty percent (50%) of the Employee's average
annual Compensation during those five (5) calendar years in
which such Compensation was highest during the ten (10)
calendar years immediately preceding his Normal Retirement
Date
exceeds
(b) the annual benefit, payable for the life of the
Employee commencing on his Normal Retirement Date and
without refund, which is the Actuarial Equivalent of that
portion of the Employee's total accounts held under the
Corporation's Individual Account Retirement Plan (the
"IARP") which is attributable to contributions made to the
IARP by the Corporation.
Such supplemental retirement benefit shall commence on the
Employee's actual retirement date and shall be payable in one of
the benefit payment forms described in paragraph 8, as the
Employee shall elect.
VI. If the Employee's employment by the Corporation shall be
terminated (other than by reason of his death or disability) prior
to his Normal Retirement Date under circumstances not resulting in
his forfeiture of benefits and rights under
paragraph 4 of this Agreement, he shall be entitled to receive a
reduced supplemental retirement benefit under this Agreement which
shall be at an annual rate computed as follows:
(a) There shall first be determined the amount by
which
(i) fifty percent (50%) of the Employee's average
annual Compensation during those five (5) calendar
years in which such Compensation was highest during the
ten (10) calendar years immediately preceding the year
in which the termination of his employment occurs
exceeds
(ii) the annual benefit, payable for the life of
the Employee commencing on the date of the termination
of his employment and without refund, which is the
Actuarial Equivalent of that portion of the Employee's
total accounts under the IARP which is attributable to
contributions made to the IARP by the Corporation.
(b) The amount thus determined shall then be
multiplied by a fraction in which the numerator shall be the
number of full years of continuous service the Employee
shall have completed prior to the termination of his
employment and the denominator shall be the number of full
years of continuous service he would have completed had he
remained in the continuous service of the Corporation until
his normal retirement date.
Such reduced supplemental retirement benefit shall commence on the
first day of the month following the Employee's termination of
employment and shall be payable in one of the benefit payment forms
described in paragraph 8, as the Employee shall elect.
Anything in this paragraph or paragraph 4 to the contrary
notwithstanding, if, prior to his Normal Retirement Date but after
a Change in Control of the Corporation shall have occurred, the
Corporation shall terminate the Employee's employment other than
for Cause, disability, or death or the employment of the Employee
shall be terminated voluntarily by the Employee for Good Reason, he
shall be entitled to elect to receive a supplemental retirement
benefit under this Agreement, whether or not the Employee shall
have then satisfied the conditions of paragraph 2 hereof, in lieu
of any benefit he is entitled to receive under sub-paragraphs (a)
and (b) of this paragraph 6, which shall be at an annual rate
computed as follows:
(c) If the Employee has not attained the age of 55 on
the date his termination of employment occurs, his benefit
shall be equal to the amount by which
(i) fifty percent (50%) of the Employee's average
annual Projected Compensation during those five (5)
calendar years in which such Projected Compensation is
highest during the ten (10) calendar years immediately
preceding the year in which he would have attained age 55
exceeds
(ii) the annual benefit, payable for the life of
the Employee commencing on the date of the termination
of his employment and without refund, which is the
Actuarial Equivalent of that portion of the Employee's
total accounts under the IARP which is attributable to
contributions made to the IARP by the Corporation.
(d) If the Employee has attained age 55 on the date
his termination of employment occurs, his benefit shall be
equal to the amount determined under sub-paragraph (a) of this
paragraph without the application of sub-paragraph (b) hereof.
Such supplemental retirement benefit under sub-paragraph (c) or (d)
hereof shall commence on the first day of the month following the
month in which the Employee attains age 65 and shall be payable in
one of the benefit payment forms described in
paragraph 8, as the Employee shall elect.
VII. If in the opinion of the Corporation the Employee becomes
totally and permanently disabled at any time while in the
employment of the Corporation and after the conditions of
paragraph 2 hereof have been satisfied, he shall become entitled to
a disability benefit which shall be at an annual rate equal to the
amount by which
(a) seventy-five percent (75%) of the Employee's
average annual Compensation during the last five (5)
consecutive calendar years preceding the year in which his
disability occurs
exceeds
(b) the annual benefit which the Employee would be
entitled to receive under the Corporation's Long Term
Disability Insurance Program if he was then eligible for
benefits thereunder (regardless of whether he participates in
said Program);
provided, however, that if the Employee is not entitled to
receive any benefit under said Program, the disability benefit to
which he is entitled hereunder shall be in an amount equal to forty
percent (40%) of the Employee's average annual Compensation
determined as provided in sub-paragraph (a) above, and provided
further that the disability benefit to which the Employee is
entitled hereunder shall in no event be less than five percent (5%)
of his average annual Compensation determined as provided in
sub-paragraph (a) above. Such disability benefit shall be
payable in equal monthly installments, the first payment to be made
on the first day of the month following that in which the
Employee's salary is terminated because of such disability, and
payments shall be made on the first day of each month thereafter
so long as such total disability subsists and the Employee lives;
provided, however, if the Employee lives until his Normal
Retirement Date, he may thereupon elect to receive, in lieu of the
disability benefit he had been receiving under this
paragraph, the supplemental retirement benefit to which he would
then be entitled under paragraph 6 if his employment by the
Corporation had terminated other than by reason of disability on
the date his disability occurred.
VIII. The normal form in which the supplemental
retirement benefit payable under paragraph 5 or 6 of this
Agreement shall be paid shall be a monthly benefit payable for life
and without refund. In lieu of such normal benefit payment form,
the Employee may elect to receive his supplemental
retirement benefit hereunder in the form of a monthly benefit
payable for life with a period certain of up to 180 months, in the
form of a monthly benefit payable for a period certain, or in the
form of a monthly benefit payable for life with continuation of
such payments (or a specified percentage thereof) to such
beneficiary as the Employee may designate for the life of such
beneficiary. The amount of benefit payable under each such
alternative benefit payment form shall be the Actuarial
Equivalent of the benefit payable in the normal form to which the
Employee would otherwise be entitled hereunder. Any election of an
alternative benefit payment form shall be made in writing and may
be changed or rescinded by the Employee at any time prior to the
date on which benefit payments are to commence. The Employee shall
have the right to designate in writing the beneficiary or
beneficiaries to receive the benefit, if any, which is payable
under any benefit payment form after the Employee's death and may
change his designation of beneficiary from time to time, at any
time prior to the date on which benefit payments are to commence.
If there shall be no beneficiary designated and surviving at the
Employee's death, the estate of the Employee shall be the
beneficiary. Whenever any benefits hereunder become payable to the
beneficiary of the Employee, the Corporation may, in its
discretion, authorize payment of such benefits to the beneficiary
in a single lump sum which is the Actuarial Equivalent of such
benefits.
Anything in this paragraph 8 to the contrary
notwithstanding, at any time after the date on which benefit
payments commence, the Employee may elect to receive his benefits
hereunder in a single lump sum in an amount which is equal to 90%
of the Actuarial Equivalent of the benefit payable in the normal
form to which the Employee is otherwise entitled hereunder on the
date as of which such election is made.
IX. If the Employee shall die while currently receiving a
supplemental retirement benefit under the provisions of
paragraph 5 or 6 of this Agreement (or after his Normal
Retirement Date while currently receiving a supplemental
retirement benefit in lieu of the disability benefit provided under
paragraph 7) and the Employee shall have elected a benefit payment
form other than a monthly benefit payable for life with no period
certain, any benefits payable after his death shall be paid to his
beneficiary in accordance with the provisions of the benefit
payment form elected by the Employee. If the Employee shall die
having reached his Normal Retirement Date but prior to his actual
retirement date and the Employee shall have elected a benefit
payment form other than a monthly benefit payable for life with no
period certain, benefits shall be paid to his
beneficiary as if the Employee had commenced to receive benefits
under on the first day of the month in which his death occurred.
If the Employee shall die after the conditions of paragraph 2 have
been satisfied and while in the active employ of the
Corporation but prior to his Normal Retirement Date, or if the
Employee shall die while currently receiving a disability benefit
under paragraph 7 but prior to his Normal Retirement Date, a death
benefit shall be paid to the Employee's beneficiary, in lieu of any
other benefit under this Agreement, which shall be at an annual
rate equal to thirty-five percent (35%) of the
Employee's average annual Compensation during those five (5)
calendar years in which such Compensation was highest during the
ten (10) calendar years immediately preceding the year in which his
death occurs or the year in which his disability occurred, as the
case may be. Such death benefit shall be payable in equal monthly
installments beginning on the first day of the month following that
in which the death of the Employee occurs and continuing thereafter
for a period certain of 120 months;
provided that the Beneficiary entitled thereto may elect to have
such benefit paid in any of the forms described in paragraph 8 in
an amount which is the Actuarial Equivalent of the form of
benefit otherwise payable under this paragraph.
If the Employee shall die after having become entitled to a
benefit under sub-paragraph (c) or (d) of paragraph 6 hereof but
prior to attaining age 65, a death benefit shall be paid to the
Employee's beneficiary, in lieu of any other benefit under this
Agreement, which shall be the single sum Actuarial Equivalent value
as of the Employee's death of the benefit to which he would have
been entitled had he survived to age 65. Such death benefit shall
be payable in a lump sum as soon as practicable after the
Employee's death; provided that the beneficiary entitled thereto
may elect to have such death benefit paid in any of the forms
described in paragraph 8.
X. Anything in this Agreement to the contrary
notwithstanding, if at any time following termination of his
employment with the Corporation the Employee shall directly or
indirectly compete with the Corporation (which shall be deemed to
include any subsidiary or affiliate of the Corporation), whether as
an individual proprietor or entrepreneur or as an officer,
employee, partner, stockholder, or in any capacity connected with
any enterprise, in any business in which the Corporation is engaged
at the time of the termination of the Employee's
employment within any state or possession of the United States of
America or any foreign country within which business is then
specifically planned by the Corporation to be conducted, the
Corporation may suspend the payment of any benefits hereunder to
the Employee until such competition shall have ceased, and in the
event such competition by the Employee shall not have ceased to the
satisfaction of the Corporation within 90 days after the
Corporation shall have given written notice to the Employee to
cease the conduct thereof, the Corporation may at any time
thereafter terminate its obligations under this Agreement. For the
purpose of the preceding sentence, conducting business, doing
business, or engaging in business shall be deemed to embrace sales
to customers or performance of services for customers who are
within a relevant geographical area, without any necessity of any
presence of the Corporation therein. Nothing herein,
however, shall prohibit the Employee from acquiring or holding any
issue of stock or securities of any company which has any
securities listed on a national exchange or quoted in the daily
listing of over-the-counter market securities, provided that at any
one time he and members of his immediate family do not own more
than five percent (5%) of the voting securities of any such
company.
XI. This Agreement is an unfunded plan maintained for the
purpose of providing deferred compensation for one of a select
group of management or highly compensated employees for purposes of
Title I of the Employee Retirement Income Security Act of 1974.
The Corporation will make all benefit payments hereunder solely on
a current disbursement basis out of the general assets of the
Corporation, including without limitation from assets held in any
grantor trust established by the Corporation for the purpose of
making some or all of such payments.
XII. This Agreement shall bind and run to the benefit of the
successors and assigns of the Corporation, including any
corporation or other form of business organization with which it
may merge or consolidate or to which it may transfer
substantially all of its assets.
XIII. The rights of the Employee under this Agreement
shall not be assigned, hypothecated, or otherwise transferred in
any manner.
XIV. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
IN WITNESS WHEREOF, the Employee has hereunto signed his name
and Crompton & Knowles Corporation has caused this
instrument to be executed in its name and on its behalf by its duly
authorized officer, as of the 20th day of October, 1993.
/s/ Vincent A. Calarco
Vincent A. Calarco
CROMPTON & KNOWLES CORPORATION
By /s/ Marvin H. Happel
Marvin H. Happel
AMENDED EXHIBIT 10 (k)
SUPPLEMENTAL RETIREMENT AGREEMENT
AMENDMENT dated as of October 20, 1993 to the Supplemental
Retirement Agreement dated as of February 1, 1987 (the
"Agreement") by and between ________________ of _______,
___________ (the "Employee") and Crompton & Knowles Corporation, a
Massachusetts corporation (the "Corporation").
WITNESSETH:
WHEREAS, the Employee and the Corporation wish to make certain
changes in the Agreement and to restate the Agreement, as
previously amended and as amended hereby, in the form of this
Amended Supplemental Retirement Agreement;
NOW, THEREFORE, the Employee and the Corporation hereby agree
that the Agreement as previously amended shall be restated in its
entirety to read as follows:
(i. The Corporation has entered into this Agreement to induce
the Employee to continue in its employment, recognizing that in the
case of a limited number of key executive employees to whom similar
contracts may be offered the ordinary retirement benefits provided
under the Corporation's retirement system do not afford sufficient
incentive in terms of economic security, when compared with
retirement arrangements available from other prospective employers
who have been, are, or may be competing for their services.
However, nothing herein shall be deemed a
contract of employment for any minimum fixed term, or to restrict
the freedom of the Corporation or the Employee to terminate the
employment relationship between them at any time.
(ii. It is expressly agreed that the Employee was not
entitled to any benefits by reason of this Agreement unless and
until he had completed five (5) years of continuous employment by
the Corporation from the effective date of this Agreement, which
was February 1, 1987. All references herein to the Corporation
shall be deemed to include any subsidiary, which shall be defined
as meaning any corporation of which this Corporation owns all of
the voting stock.
(iii. For the purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Normal Retirement Date" shall mean the first day
of the month on or next after the Employee's sixty-fifth
(65th) birthday.
(b) "Compensation" shall mean all of Employee's cash
compensation for a calendar year, including salary, any amount
contributed by the Employee to a cash or deferred plan under
Section 401(k) of the Internal Revenue Code of 1986, as amended,
and any incentive compensation award or bonus with respect to such
year (even if paid in a subsequent year), but excluding any
incentive compensation award or bonus paid during such year with
respect to a prior year and extraordinary earnings such as
insurance costs or gains on exercise of stock options.
(c) "Actuarial Equivalent" shall mean an amount of
equivalent value computed on the basis of the actuarial
assumptions used from time to time by the actuarial consultants
employed by the Corporation in connection with its employee benefit
plans, but using an interest assumption which is not less than the
Pension Benefit Guaranty Corporation interest assumption in effect
at the beginning of the month as of which the
computation is made.
(d) "Company Plan Benefit" shall mean the amount of benefit
payable to or for the account of the Employee from the
Corporation's Individual Account Retirement Plan (or from any other
retirement plan sponsored by the Corporation which may hereafter be
adopted in lieu of or in addition to said Individual Account
Retirement Plan) which is attributable to contributions made by the
Corporation, calculated in the form of a straight life annuity
(regardless of the form in which such benefit may actually be
payable).
(e) "Cause" shall mean (i) the Employee's willful and
continued failure to substantially perform assigned duties with the
Corporation (other than any such failure resulting from incapacity
due to physical or mental illness or any such actual or anticipated
failure resulting from termination for Good
Reason), after a demand for substantial performance is delivered to
the Employee by the Board of Directors of the Corporation,
specifically identifying the manner in which the Board believes
that the duties have not been substantially performed, or (ii) the
Employee's willful conduct which is demonstrably and
materially injurious to the Corporation. For purposes of this
sub-paragraph (e), no act, or failure to act, shall be considered
"willful" unless done, or omitted to be done, not in good faith and
without reasonable belief that such action or omission was in the
best interest of the Corporation.
(f) "Good Reason" shall mean (i) the assignment to the
Employee of any duties inconsistent in any respect with the
Employee's position (including status, offices, titles, and
reporting requirements), authority, duties, or responsibilities as
contemplated by any Employment Agreement between the Employee and
the Corporation, or any other action by the Corporation which
results in a diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and inadvertent
action which is remedied by the Corporation promptly after
receipt of notice thereof given by the Employee; (ii) any failure
by the Corporation to comply with any of the provisions of any
Employment Agreement between the Employee and the Corporation,
other than an insubstantial and inadvertent failure which is
remedied by the Corporation promptly after receipt of notice
thereof given by the Employee; (iii) any change not concurred in by
the Employee in the location of the office at which the
Employee is principally based, except for travel reasonably
required in the performance of the Employee's responsibilities and
substantially consistent with prior business travel
obligations of the Employee; or (iv) any purported termination by
the Corporation of the Employee's employment otherwise than as
permitted by any Employment Agreement between the Employee and the
Corporation.
(g) "Change in Control" shall mean a change in control of the
Corporation of a nature that would be required to be reported in
response to Item 1(a) of the Current Report on Form 8-K, as in
effect on January 1, 1988, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); provided
that, without limitation, such a "Change in Control" shall be
deemed to have occurred if: (i) a third person, including a "group"
as such term is used in Section 13(d)(3) of the Exchange Act, other
than the trustee of any employee benefit plan of the Corporation,
becomes the beneficial owner, directly or
indirectly, of 20% or more of the combined voting power of the
Corporation's outstanding voting securities ordinarily having the
right to vote for the election of directors of the Corporation;
(ii) during any period of 14 consecutive months individuals who, at
the beginning of such consecutive 24-month period, constitute the
Board of Directors of the Corporation (the "Board" generally and,
as of the date of this Agreement, the "Incumbent Board") cease for
any reason (other than retirement upon reaching normal retirement
age, disability, or death) to constitute at least a majority of the
Board; provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Corporation's shareholders, was
approved by a vote of at least three quarters of the directors
comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest
relating to the election of the Directors of the Corporation, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent
Board; or (iii) the Corporation shall cease to be a publicly owned
corporation having its outstanding Common Stock listed on the New
York Stock Exchange or quoted in the NASDAQ National Market System.
(h) "Projected Compensation" shall mean (i) for any
calendar year throughout which the Employee is employed by the
Corporation, his Compensation (as defined in paragraph 3(b) hereof)
for such year, and (ii) for any calendar year during or after which
his employment has been terminated, the compensation the Employee
would have received for such year if he had received (A) salary at
a rate determined by projecting his annual rate of salary at the
end of the last full calendar year of his
employment forward at a rate equal to 5% in excess of the annual
percentage change in the Consumer Price Index as published by the
U.S. Bureau of Labor Statistics for such year and (B) a bonus equal
to 40% of his salary as thus projected.
(iv. If, prior to his Normal Retirement Date, the Employee
shall voluntarily terminate his employment with the Corporation
(except as hereinafter provided) or his employment shall be
terminated by the Corporation for Cause, he shall thereby forfeit
all rights and benefits under this Agreement. If the employment of
the Employee shall be terminated on or after his Normal
Retirement Date, or if, prior to that date but after the
conditions of paragraph 2 hereof have been satisfied, the
Employee shall voluntarily terminate his employment with the
approval of the Corporation (as evidenced by vote of its Board of
Directors or the Committee thereof authorized to administer this
Agreement) or his employment shall be terminated by the
Corporation without Cause, this Agreement shall continue in full
force and effect, and the Employee shall become entitled to the
rights and benefits hereinafter set forth upon the occurrence of
the events respectively giving rise thereto.
(v. If the Employee shall remain in employment by the
Corporation until and shall reach his Normal Retirement Date, he
shall be entitled to receive a supplemental retirement benefit
under this Agreement which shall be at an annual rate equal to the
amount by which
(a) thirty-five percent (35%) of the Employee's
average annual Compensation during those five (5) calendar
years in which such Compensation was highest during the ten
(10) calendar years immediately preceding his Normal
Retirement Date
exceeds
(b) the annual amount of the Company Plan Benefit
payable to the Employee, determined as of his Normal
Retirement Date.
Such supplemental retirement benefit shall commence on the
Employee's actual retirement date and shall be payable in one of
the benefit payment forms described in paragraph 8, as the
Employee shall elect.
(vi. If the Employee's employment by the Corporation shall be
terminated (other than by reason of his death or disability) prior
to his Normal Retirement Date under circumstances not resulting in
his forfeiture of benefits and rights under
paragraph 4 of this Agreement, he shall be entitled to receive a
reduced supplemental retirement benefit under this Agreement which
shall be at an annual rate computed as follows:
(a) There shall first be determined the amount which
is equal to thirty-five percent (35%) of the Employee's
average annual Compensation during those five (5) calendar
years in which such Compensation was highest during the ten
(10) calendar years immediately preceding the year in which
the termination of his employment occurs.
(b) The amount thus determined shall be multiplied by
a fraction in which the numerator shall be the number of
full years of continuous service the Employee shall have
completed between the effective date of this Agreement and the
termination of his employment and the denominator shall be the
number of full years of continuous service he would have
completed between the effective date of this Agreement and his
Normal Retirement Date had he remained in the
continuous service of the Corporation until his Normal
Retirement Date.
(c) There shall then be subtracted from the amount
thus determined the annual amount of the Company Plan
Benefit payable to the Employee, determined as of the date
of the termination of his employment.
Such reduced supplemental retirement benefit shall commence on the
first day of the month following the Employee's termination of
employment and shall be payable in one of the benefit payment forms
described in paragraph 8, as the Employee shall elect.
Anything in this paragraph or paragraph 4 to the contrary
notwithstanding, if, prior to his Normal Retirement Date but after
a Change in Control of the Corporation shall have occurred, the
Corporation shall terminate the Employee's employment other than
for Cause, disability, or death or the employment of the Employee
shall be terminated voluntarily by the Employee for Good Reason,
he shall be entitled to elect to receive a supplemental retirement
benefit under this Agreement, whether or not the Employee shall
have then satisfied the conditions of paragraph 2 hereof, in lieu
of any benefit he is entitled to receive under sub-paragraphs
(a)-(c), inclusive, of this paragraph 6, which shall be at an
annual rate computed as follows:
(d) If the Employee has not attained the age of 55 on
the date his termination of employment occurs, his benefit
shall be equal to the amount by which
(i) thirty-five percent (35%) of the Employee's
average annual Projected Compensation during those
five (5) calendar years in which such Projected
Compensation is highest during the ten (10)
calendar years immediately preceding the year in
which he would have attained age 55
exceeds
(ii) the annual amount of the Company Plan
Benefit payable to the Employee, determined as of
the date of the termination of his employment.
(e) If the employee has attained age 55 on the date
his termination of employment occurs, his benefit shall be
equal to the amount determined under sub-paragraphs (a) and
(c) of this paragraph without the application of sub-
paragraph (b) hereof.
Such supplemental retirement benefit under sub-paragraph (d) or (e)
hereof shall commence on the first day of the month following the
month in which the Employee attains age 65 and shall be payable in
one of the benefit payment forms described in
paragraph 8, as the Employee shall elect.
(vii. If the Employee becomes qualified for benefits under
any long term disability plan sponsored by the Corporation as a
result of total disability while in the employment of the
Corporation and after the conditions of paragraph 2 hereof have
been satisfied, but prior to his Normal Retirement Date, he shall
become entitled to a disability benefit hereunder which shall be at
an annual rate computed as follows:
(a) There shall first be determined the amount which
is equal to thirty five percent (35%) of the Employee's
average annual Compensation during those five (5) calendar
years in which such Compensation was highest during the ten
(10) calendar years preceding the year in which his
disability occurs.
(b) The amount thus determined shall be multiplied by
a fraction in which the numerator shall be the number of
full years of continuous service the Employee shall have
completed between the effective date of this Agreement and the
date his employment terminates on account of disability and
the denominator shall be the number of full years of
continuous service he would have completed between the
effective date of this Agreement and his Normal Retirement
Date had he remained in the continuous service of the
Corporation until his Normal Retirement Date.
(c) There shall then be subtracted from the amount thus
determined the annual amount of the Company Plan Benefit payable to
the Employee, determined as of the date his disability benefit
hereunder is to commence.
Such disability benefit shall commence on the date the benefits
payable to the Employee under such long term disability plan
sponsored by the Corporation cease, if the Employee is then living,
and shall be payable in one of the benefit payment forms described
in paragraph 8, as the Employee shall elect.
(viii. The normal form in which the benefit payable under
paragraphs 5, 6, or 7 of this Agreement shall be paid shall be a
monthly benefit payable for life and without refund. In lieu of
such normal benefit payment form, the Employee may elect to receive
his benefit hereunder in the form of a monthly benefit payable for
life with a period certain of up to 180 months, in the form of a
monthly benefit payable for a period certain, or in the form of a
monthly benefit payable for life with continuation of such payments
(or a specified percentage thereof) to such beneficiary as the
Employee may designate for the life of such beneficiary. The
amount of benefit payable under each such alternative benefit
payment form shall be the Actuarial
Equivalent of the benefit payable in the normal form to which the
Employee would otherwise be entitled hereunder. Any election of an
alternative benefit payment form shall be made in writing and may
be changed or rescinded by the Employee at any time prior to the
date on which benefit payments are to commence. The Employee shall
have the right to designate in writing the beneficiary or
beneficiaries to receive the benefit, if any, which is payable
under any benefit payment form after the Employee's death and may
change his designation of beneficiary from time to time, at any
time prior to the date on which benefit payments are to commence.
If there shall be no beneficiary designated and surviving at the
Employee's death, the estate of the Employee shall be the
beneficiary. Whenever any benefits hereunder become payable to the
beneficiary of the Employee, the Corporation may, in its
discretion, authorize payment of such benefits to the beneficiary
in a single lump sum which is the Actuarial Equivalent of such
benefits.
Anything in this paragraph 8 to the contrary
notwithstanding, at any time after the date on which benefit
payments commence, the Employee may elect to receive his benefits
hereunder in a single lump sum in an amount which is equal to 90%
of the Actuarial Equivalent of the benefit payable in the normal
form to which the Employee is otherwise entitled hereunder on the
date as of which such election is made.
(ix. If the Employee shall die while currently receiving a
benefit under the provisions of paragraphs 5, 6, or 7 of this
Agreement and the Employee shall have elected a benefit payment
form other than a monthly benefit payable for life with no period
certain, any benefits payable after his death shall be paid to his
beneficiary in accordance with the provisions of the benefit
payment form elected by the Employee. If the Employee shall die
after having reached his Normal Retirement Date but prior to his
actual retirement date and the Employee shall have elected a
benefit payment form other than a monthly benefit payable for life
with no period certain, benefits shall be paid to his
beneficiary as if the Employee had commenced to receive benefits
hereunder on the first day of the month in which his death
occurred. If the Employee shall die after the condition of
paragraph 2 has been satisfied and while in the active employ of
the Corporation but prior to his Normal Retirement Date, or if the
Employee shall die after having become entitled to receive a
disability benefit under paragraph 7 but prior to his Normal
Retirement Date, a death benefit shall be paid to the Employee's
beneficiary, in lieu of any other benefit under this Agreement,
which shall be at an annual rate equal to twenty percent (20%) of
the Employee's average annual Compensation during those five (5)
calendar years in which such Compensation was highest during the
ten (10) calendar years immediately preceding the year in which his
death occurs or the year in which his disability occurred, as the
case may be. Such death benefit, which shall be in addition to any
Company Plan Benefit or benefits under any group life insurance
plan sponsored by the Corporation which is payable on account of
the Employee's death, shall be payable in equal
monthly installments beginning on the first day of the month
following that in which the death of the Employee occurs and
continuing thereafter for a period certain of 120 months;
provided that the Beneficiary entitled thereto may elect to have
such benefit paid in any of the forms described in paragraph 8 in
an amount which is the Actuarial Equivalent of the form of
benefit otherwise payable under this paragraph.
If the Employee shall die after having become entitled to a
benefit under sub-paragraph (d) or (e) of paragraph 6 hereof but
prior to attaining age 65, a death benefit shall be paid to the
Employee's beneficiary, in lieu of any other benefit under this
Agreement, which shall be the single sum Actuarial Equivalent value
as of the Employee's death of the benefit to which he would have
been entitled had he survived to age 65. Such death benefit shall
be payable in a lump sum as soon as practicable after the
Employee's death; provided that the beneficiary entitled thereto
may elect to have such death benefit paid in any of the forms
described in paragraph 8.
(x. Anything in this Agreement to the contrary
notwithstanding, if at any time following termination of his
employment with the Corporation the Employee shall directly or
indirectly compete with the Corporation (which shall be deemed to
include any subsidiary or affiliate of the Corporation), whether as
an individual proprietor or entrepreneur or as an officer,
employee, partner, stockholder, or in any capacity connected with
any enterprise, in any business in which the Corporation is engaged
at the time of the termination of the Employee's
employment within any state or possession of the United States of
America or any foreign country within which business is then
specifically planned by the Corporation to be conducted, the
Corporation may suspend the payment of any benefits hereunder to
the Employee until such competition shall have ceased, and in the
event such competition by the Employee shall not have ceased to the
satisfaction of the Corporation within 90 days after the
Corporation shall have given written notice to the Employee to
cease the conduct thereof, the Corporation may at any time
thereafter terminate its obligations under this Agreement. For the
purpose of the preceding sentence, conducting business, doing
business, or engaging in business shall be deemed to embrace sales
to customers or performance of services for customers who are
within a relevant geographical area, without any necessity of any
presence of the Corporation therein. Nothing herein,
however, shall prohibit the Employee from acquiring or holding any
issue of stock or securities of any company which has any
securities listed on a national exchange or quoted in the daily
listing of over-the-counter market securities, provided that at any
one time he and members of his immediate family do not own more
than five percent (5%) of the voting securities of any such
company.
(xi. This Agreement is an unfunded plan maintained for the
purpose of providing deferred compensation for one of a select
group of management or highly compensated employees for purposes of
Title I of the Employee Retirement Income Security Act of 1974.
The Corporation will make all benefit payments hereunder solely on
a current disbursement basis out of the general assets of the
Corporation, including without limitation from assets held in any
grantor trust established by the Corporation for the purpose of
making some or all of such payments.
(xii. This Agreement shall bind and run to the benefit of
the successors and assigns of the Corporation, including any
corporation or other form of business organization with which it
may merge or consolidate or to which it may transfer
substantially all of its assets.
(xiii. The rights of the Employee under this Agreement
shall not be assigned, hypothecated, or otherwise transferred in
any manner.
(xiv. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
IN WITNESS WHEREOF, the Employee has hereunto signed his name
and Crompton & Knowles Corporation has caused this
instrument to be executed in its name and on its behalf by its duly
authorized officer, as of the 20th day of October, 1993.
Employee
CROMPTON & KNOWLES CORPORATION
By:
CROMPTON & KNOWLES CORPORATION EXHIBIT 10 (l)
SUPPLEMENTAL RETIREMENT AGREEMENT TRUST AGREEMENT
This Agreement made this 20th day of October, 1993 by and
between Crompton & Knowles Corporation, a Massachusetts
corporation (the "Company"), and Shawmut Bank, N.A., a national
banking association organized and existing under the laws of the
United States of America (the "Trustee").
WITNESSETH:
WHEREAS, the Company has adopted the nonqualified deferred
compensation plans listed in Appendix A hereto and may adopt
similar plans or arrangements in the future (individually, a "Plan"
and collectively, the "Plans");
WHEREAS, the Company has incurred or expects to incur
liability under the terms of the Plans with respect to the
individuals participating therein;
WHEREAS, the Company wishes to establish a trust
(hereinafter called the "Trust") and to contribute to the Trust
assets that shall be held therein, subject to the claims of the
Company's creditors in the event of the Company's Insolvency (as
herein defined), until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the
Plans;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the
status of any of the Plans as an unfunded plan maintained for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title I
of the Employee Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a source of funds
to assist it in meeting its liabilities under the Plans;
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held, and disposed of as
follows:
Section (i. Establishment of Trust
(a) The Company hereby deposits with the Trustee in trust the
sum of $10.00, which shall become the principal of the Trust to be
held, administered, and disposed of by the Trustee as provided in
this Trust Agreement.
(b) The Trust hereby established is revocable by the
Company; it shall become irrevocable upon the occurrence of a
Change in Control, as defined herein.
(c) The Trust is intended to be a grantor trust, of which the
Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon,
shall be held separate and apart from other funds of the Company
and shall be used exclusively for the uses and purposes of Plan
participants and general creditors of the Company as herein set
forth. Plan participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any
assets of the Trust. Any rights created under the Plans and this
Trust Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against the Company. Any
assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) hereof.
(e) The Company, in its sole discretion, may at any time or
from time to time make additional deposits of cash or other
property in trust with the Trustee to augment the principal to be
held, administered, and disposed of by the Trustee as provided in
this Trust Agreement. Upon a Change of Control, the Company shall,
as soon as possible but in no event later than 30 days following
the Change of Control, make an irrevocable contribution to the
Trust in an amount that is sufficient to pay each Plan participant
or beneficiary the benefits to which each of them would be entitled
pursuant to the terms of each Plan as of the date in which the
Change of Control occurred.
Section (ii. Payments to Plan Participants
and Their Beneficiaries
(a) The Trustee shall keep such records and maintain such
books and accounts as shall at all times be sufficient to
indicate, for accounting purposes, the proportionate part of the
Trust fund as constituted from time to time which is held by it for
each Plan participant under each Plan. For this purpose only, the
Trustee shall create and maintain a separate account for each Plan
participant (and such sub-accounts as may be
contemplated by any Plan) and shall credit thereto all
contributions made by the Company to fund benefits payable to such
Plan participant and shall charge thereto all payments made to or
for the account of such Plan participant. Anything in the
foregoing to the contrary notwithstanding, no Plan participant
shall have a preferred claim on, or any beneficial interest in, the
account maintained for him by the Trustee or any assets of the
Trust fund allocated thereto for accounting purposes. The Trustee
may hold the Trust fund as a single fund, regardless of how many
Plans and/or Plan participants are participating
hereunder, and may from time to time invest and reinvest the
commingled assets and receive the income and proceeds thereof and
make payments therefrom, all without regard to the source of any
part of the commingled assets.
(b) The Company shall from time to time deliver to the
Trustee a schedule (the "Payment Schedule") that indicates the
amounts payable in respect of each Plan participant (and his or her
beneficiaries), or that provides a formula or other
instructions acceptable to the Trustee for determining the
amounts so payable, the form in which such amount is to be paid (as
provided for or available under the Plans), and the time of
commencement of payment of such amounts. Except as otherwise
provided herein, the Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with such
Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state, or local taxes
that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plans and shall pay amounts
withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld, and paid
by the Company.
(c) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plans shall be determined by
the Company or such party as it shall designate under the Plans,
and any claim for such benefits shall be considered and reviewed
under the procedures set out in the Plans.
(d) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the
terms of any Plan. The Company shall notify the Trustee of its
decision to make payment of benefits directly prior to the time
amounts are payable to Plan participants or their
beneficiaries. In addition, if the principal of the Trust, and any
earnings thereon, are not sufficient to make payments of benefits
in accordance with the terms of any Plan, the Company shall make
the balance of each such payment as it falls due. The Trustee
shall notify the Company when principal and earnings of the Trust
are not sufficient to make payments as provided in Section 2(b)
above.
Section (iii. Trustee Responsibility Regarding
Payments to Trust Beneficiary When Company
Is Insolvent
(a) The Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent.
The Company shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) the Company is unable to pay its debts as
they become due, or (ii) the Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below:
(1) The Board of Directors and the Chief
Executive Officer of the Company shall have the duty to
inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of
the Company alleges in writing to the Trustee that the
Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending
such determination, the Trustee shall discontinue
payment of benefits to Plan participants or their
beneficiaries.
(2) Unless the Trustee has actual knowledge of
the Company's Insolvency, or has received notice from
the Company or a person claiming to be a creditor
alleging that the Company is Insolvent, the Trustee
shall have no duty to inquire whether the Company is
Insolvent. The Trustee may in all events rely on such
evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee
with a reasonable basis for making a determination
concerning the Company's solvency.
(3) If at any time the Trustee has determined
that the Company is Insolvent, the Trustee shall
discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust
for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their
beneficiaries to pursue their rights as general
creditors of the Company with respect to benefits due
under the Plans or otherwise.
(4) The Trustee shall resume the payment of
benefits to Plan participants or their beneficiaries in
accordance with Section 2 of this Trust Agreement only
after the Trustee has determined that the Company is
not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plans
for the period of such discontinuance, less the aggregate amount of
any payments made to Plan participants or their beneficiaries by
the Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
Section 4. Payments to Company.
Except as provided in Section 3 hereof, after the Trust has
become irrevocable, the Company shall have no right or power to
direct the Trustee to return to the Company or to divert to others
any of the Trust assets before all payment of benefits have been
made to Plan participants and their beneficiaries pursuant to the
terms of the Plans, except that in the event the Company shall
certify in writing to the Trustee that the value of the account
maintained for any Plan participant or beneficiary is at least 125%
of the benefits to which such Plan participant or beneficiary would
be entitled pursuant to the terms of each Plan as of the date of
such certification, the Trustee shall return to the Company the
amount of such account in excess of 125% of such benefits.
Section 5. Investment Authority
(a) The Trustee shall from time to time inform the Company
and each Plan participant as to the investment media available for
investment of the Trust fund, including stock, bonds,
securities, and other property (which may include interests in
trust funds that have been or shall hereafter be created and
maintained by the Trustee as trustee for the collective
investment of trust funds), shares or other interests in open-end
management investment companies (including without limitation any
company to which the Trustee or any affiliate of the Trustee
provides advice and/or other services for which such company pays
the Trustee or its affiliate compensation), and insurance
policies on the lives of Plan participants. After consulting with
each Plan participant, the Company shall direct in writing how
contributions made to the Trustee for the account of such Plan
Participant under each Plan and the portion of the Trust fund which
is from time to time allocated to the account
established and maintained for such Plan participant under each
such Plan pursuant to Section 2(a) shall be invested among the
investment media from time to time offered by the Trustee for
investment of the Trust fund.
(b) The Trustee may invest in securities (including stock or
rights to acquire stock) or obligations issued by the Company. All
rights associated with assets of the Trust shall be exercised by
the Trustee or the persons designated by the Trustee, and shall in
no event be exercisable by or rest with Plan
participants.
(c) The Company shall have the right at any time, and from
time to time in its sole discretion, to substitute assets of equal
fair market value for any asset held by the Trust. This right is
exercisable by the Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity.
Section 6. Disposition of Income
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, and all gains and losses on
investments of the Trust shall be allocated to the accounts
maintained for Plan participants pursuant to Section 2(a) hereof.
Section 7. Accounting by
Trustee
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between the Company and the Trustee. Within
90 days following the close of each calendar year and within 90
days after the removal or resignation of the Trustee, the Trustee
shall deliver to the Company a written account of its
administration of the Trust during such year or during the period
from the close of the last preceding year to the date of such
removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued
interest paid or receivable being shown separately), and showing
all cash, securities, and other property held in the Trust at the
end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. Responsibility of Trustee
(a) The Trustee shall act with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with
like aims, provided, however, that the Trustee shall incur no
liability to any person for any action taken pursuant to a
direction, request, or approval given by the
Company which is contemplated by, and in conformity with, the terms
of the Plans or this Trust and is given in writing by the Company.
In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve
the dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Company agrees to
indemnify the Trustee against the Trustee's costs, expenses, and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments. If the Company does not pay such costs, expenses, and
liabilities in a reasonably timely manner, the Trustee may obtain
payment from the Trust.
(c) The Trustee may consult with legal counsel (who may also
be counsel for the Company generally) with respect to any of its
duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants, or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly
provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, the Trustee
shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor Trustee, or
to loan to any person the proceeds of any borrowing against such
policy.
(f) However, notwithstanding the provisions of Section 8(e)
above, the Trustee may loan to the Company the proceeds of any
borrowing against an insurance policy held as an asset of the
Trust.
(g) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Internal Revenue Code.
Section 9. Compensation and Expenses of Trustee
The Company shall pay all administrative and Trustee's fees
and expenses. If not so paid, the fees and expenses shall be paid
from the Trust.
Section 10. Resignation and Removal of Trustee
(a) The Trustee may resign at any time by written notice to
the Company, which shall be effective 60 days after receipt of such
notice unless the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 60 days
notice or upon shorter notice accepted by the Trustee.
(c) In the event of a Change of Control, as defined herein,
the Trustee may not be removed by the Company for two years
thereafter.
(d) If the Trustee resigns or is removed within two years of
a Change of Control, as defined herein, the Trustee shall select a
successor Trustee in accordance with the provisions of Section
11(b) hereof prior to the effective date of the Trustee's
resignation or removal.
(e) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets of the Trust shall
subsequently be transferred to the successor Trustee. The
transfer shall be completed within 60 days after receipt of notice
of resignation, removal, or transfer unless the Company extends the
time limit.
(f) If the Trustee resigns or is removed, a successor shall
be appointed, in accordance with Section 11 hereof, by the
effective date of resignation or removal under paragraphs (a) or
(b) of this section. If no such appointment has been made, the
Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of
the Trustee in connection with any such proceeding shall be allowed
as administrative expenses of the Trust.
Section 11. Appointment of Successor Trustee
(a) If the Trustee resigns or is removed in accordance with
Section 10(a) or (b) hereof, the Company may appoint any third
party, such as a bank trust department or other party that may be
granted corporate trustee powers under state law, as a successor to
replace the Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new
Trustee, who shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust assets. The
former Trustee shall execute any instrument necessary or reasonably
requested by the Company or the successor Trustee to evidence the
transfer.
(b) If the Trustee resigns or is removed pursuant to the
provisions of Section 10(d) hereof and selects a successor
Trustee, the Trustee may appoint any third party such as a bank
trust department or other party that may be granted corporate
trustee powers under state law. The appointment of a successor
Trustee shall be effective when accepted in writing by the new
Trustee. The new Trustee shall have all the rights and powers of
the former Trustee, including ownership rights in Trust assets.
The former Trustee shall execute any instrument necessary or
reasonably requested by the successor Trustee to evidence the
transfer.
(c) The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing
Trust assets, subject to Sections 7 and 8 hereof. The successor
Trustee shall not be responsible for, and the Company shall
indemnify and defend the successor Trustee from, any claim or
liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing at
the time it becomes successor Trustee.
Section 12. Amendment or Termination
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company.
Notwithstanding the foregoing, no such amendment shall conflict
with the terms of the Plans or shall make the Trust revocable after
it has become irrevocable in accordance with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which
Plan participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plans, unless sooner revoked
in accordance with Section 1(b) hereof. Upon termination of the
Trust any assets remaining in the Trust shall be returned to the
Company.
(c) Upon written approval of Plan participants or
beneficiaries entitled to payment of benefits pursuant to the terms
of the Plans, the Company may terminate this Trust prior to the
time all benefit payments under the Plans have been made. All
assets in the Trust at termination shall be returned to the
Company.
Section 13. Miscellaneous
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition, without
invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered, or subjected to attachment, garnishment, levy,
execution, or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts.
(d) For purposes of this Trust, Change of Control shall mean
a change in control of the Company of a nature that would be
required to be reported in response to Item 1(a) of the Current
Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a
"Change of Control" shall be deemed to have occurred if: (i) a
third person, including a "group" as such term is used in Section
13(d)(3) of the Exchange Act, other than the trustee of any
employee benefit plan of the Company, becomes the beneficial owner,
directly or indirectly, of 20% or more of the combined voting power
of the Company's outstanding voting securities ordinarily having
the right to vote for the election of directors of the Company;
(ii) during any period of 24 consecutive months individuals who, at
the beginning of such consecutive 24-month period, constitute the
Board of Directors of the Company (the "Board" generally and as of
the date hereof the "Incumbent
Board") cease for any reason (other than retirement upon reaching
normal retirement age, disability, or death) to constitute at least
a majority of the Board; provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least three quarters of the directors
comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest
relating to the election of the directors of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act) shall be, for purposes of this Trust Agreement,
considered as though such person were a member of the Incumbent
Board; or (iii) the Company shall cease to be a publicly owned
corporation having its outstanding Common Stock listed on the New
York Stock Exchange or quoted in the NASDAQ National Market System.
(e) The Board of Directors and the Chief Executive Officer of
the Company shall have the duty to inform the Trustee in writing
that a Change of Control of the Company has occurred. If a
participant or beneficiary alleges in writing to the Trustee that
a Change of Control has occurred, the Trustee shall have no duty to
inquire whether a Change of Control has occurred. The Trustee may
in all events rely on such evidence concerning a Change of Control
as may be furnished to the Trustee and that provides the Trustee
with a reasonable basis for making a
determination that a Change of Control has occurred.
Section 14. Effective Date
The effective date of this Trust Agreement shall be October
20, 1993.
IN WITNESS WHEREOF, the Company and the Trustee have caused
this Trust Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
CROMPTON & KNOWLES CORPORATION
By:/s/ Marvin H. Happel
Marvin H. Happel
Its Vice President-Organization
SHAWMUT BANK, N.A.
By:/s/ Lois E. Uliana, A.V.P.
Lois E. Uliana, A.V.P.
CROMPTON & KNOWLES CORPORATION EXHIBIT 10 (m)
AMENDED
BENEFIT EQUALIZATION PLAN
I. Purpose of the Plan. The purpose of the Plan, as amended in
its entirety to read as follows, is to provide eligible
employees of Crompton & Knowles Corporation and its
subsidiaries with deferred compensation and benefits
substantially equivalent to those they would have received
under Qualified Plans of the Company in which they
participate, in the absence of certain limitations on
contributions and benefits which are imposed by the Code on
such Qualified Plans. The effective date of the Plan as
originally adopted was January 1, 1987. The effective date of
the amended Plan is October 20, 1993.
II. Definitions. The following terms shall have the following
meanings for purposes of the Plan:
(a) "Code" means the Internal Revenue Code of 1986 as
presently in effect and as it may be amended from time
to time hereafter.
(b) "Committee" means the Committee referred to in Section
17 hereof.
(c) "Company" means Crompton & Knowles Corporation, a
Massachusetts corporation, any subsidiary thereof, and
any successor thereto.
(d) "Compensation" means a Participant's compensation or
salary as defined under each applicable Qualified Plan
pursuant to which benefits are determined under this
Plan.
(e) "ERISA" means the Employee Retirement Income Security
Act of 1974 as presently in effect and as it may be
amended from time to time hereafter.
(f) "Participant" means any eligible employee of the
Company who becomes eligible to receive a benefit of
any type from this Plan or whose beneficiary may be
eligible to receive any such benefit.
(g) "Plan" means the Benefit Equalization Plan of the
Company as set forth herein and as it may be amended
from time to time.
(h) "Qualified Plan" means any employee benefit plan of the
Company which constitutes a qualified plan under
Section 401 of the Code, including without limitation
the Company's Individual Account Retirement Plan
("IARP") and its Employee Stock Ownership Plan (the
"ESOP").
(i) "Section 401(k) Limitation" means the limit (as
adjusted from time to time) imposed by Section 402(g)
of the Code on elective deferrals pursuant to a
qualified cash or deferred arrangement under Section
401(k) of the Code which may be excluded from the gross
income of an individual for any taxable year.
(j) "Section 415 Limitation" means the annual limit imposed
by Section 415 of the Code on contributions and other
additions which may be made with respect to a
Participant under Qualified Plans in which he
participates.
III. Eligible Employees. Any employee of the Company who is a
member of the Management Committee and who is a participant
in one or more Qualified Plans shall be eligible to
participate herein and to receive benefits hereunder. IV.
Section 401(k) Account. If the Section 401(k) Limitation
shall apply at anytime during a taxable year to elective
deferrals of a Participant which would otherwise have been
contributed to a Qualified Plan, the Company shall
thereafter allocate to an account maintained on its books
(the Participant's "Section 401(k) Account") amounts equal to
the amounts which it would have contributed to the
Qualified Plan as voluntary participant contributions on
behalf of the Participant from time to time during the
remainder of such year in the absence of the Section 401(k)
Limitation. The Participant may direct the Company to change
the rate of his contributions and may suspend or resume his
contributions in the manner and at the times set forth in the
Qualified Plan pursuant to which such
contributions would have been made in the absence of the
Section 401(k) Limitation.
V. Section 415 Accounts. If the Section 415 Limitation shall
apply at any time during a taxable year to employee or
employer contributions which would otherwise have been made to
a Qualified Plan by or on behalf of a Participant, the Company
shall thereafter allocate to accounts maintained on its books
(the Participant's "Section 415 Accounts") amounts equal to
the amounts which it would have withheld from the
Participant's compensation for contributions to the
Qualified Plan and which it would have contributed to the
Qualified Plan as employer contributions on behalf of the
Participant from time to time during the remainder of such
year in the absence of the Section 415 Limitation, assuming
(in the case of matching employer contributions under the
ESOP) that the Participant continues to make contributions to
this Plan during such period. The Company shall maintain
separate Section 415 Accounts with respect to each Qualified
Plan pursuant to which amounts are allocated for the benefit
of a Participant under this Section and a separate Account for
employee and employer contributions made with respect to each
such Qualified Plan.
VI. Contributions with Respect to Bonuses. Anything in the IARP
or the ESOP to the contrary notwithstanding, beginning in
1988, all employee and employer contributions which would
otherwise be contributed to the IARP or the ESOP with
respect to any bonus payable to a Participant under any
Company bonus plan in which he participates shall be made to
the Plan and shall be allocated to his appropriate Section 415
Account under the Plan. Each Participant shall be deemed to
have waived any right he may have to participate in the IARP
and the ESOP to the extent that employee and employer
contributions with respect to any bonus payable to him are
made to the Plan (rather than to the IARP or the ESOP)
pursuant to the provisions of this Section.
VII. Treatment under Other Agreements. Anything in this Plan to
the contrary notwithstanding, all compensation earned by a
Participant which is contributed to an Account under the Plan
in lieu of being paid to the Participant or to a
Qualified Plan on his behalf shall be treated as
compensation paid to the Participant for the payroll period
or (in the case of a bonus) for the year in which earned for
purposes of any Supplemental Retirement Agreement between
the Company and such Participant, and all amounts payable to
a Participant from the Plan which are attributable to
employer contributions (including earnings thereon) made to
this Plan in lieu of to the IARP shall be treated as if they
were payable from the IARP for purposes of any such
Supplemental Retirement Agreement.
VIII. Investment of Accounts. After consulting with each
Participant, the Company shall direct the Trustee
referred to in Section 15 hereof in writing how such
Participant's Accounts under the Plan shall be invested
among the investment media from time to time offered by
the Trustee for investment of such Accounts under the
Trust Agreement. The benefits due to each Participant
under the Plan at any time and from time to time shall be
equal to the balance of such Participant's Accounts under
the Trust Agreement.
IX. Form and Time of Benefit Payments. Amounts held in the
Accounts maintained for a Participant under the Plan will be
distributed by the Company in the same form and at the same
time as elected by the Participant (or his spouse or
beneficiary, if applicable) for payment of benefits from the
Qualified Plan with respect to which such amounts are
payable hereunder unless the Participant shall have elected,
in a manner and on a form approved by the Committee, not
less than 30 days prior to the termination of the
Participant's employment for any reason, to receive the
value of such Accounts in either five, ten, or fifteen annual
installments. If a Participant shall elect to
receive the value of his Accounts in installments, the first
such installment shall be paid promptly after the
termination of the Participant's employment and each
succeeding installment shall be paid on or before the last
day in January of each succeeding year until the total
number of installments elected by the Participant shall have
been paid. Each such installment shall be in an amount
determined by multiplying the balance of the Participant's
Accounts as of the last day of the month preceding the date of
payment thereof by a fraction, the numerator of which shall be
one and the denominator of which shall be the number of
installments remaining to be paid to the
Participant. Except as provided in Section 15 hereof, all
amounts payable to or on behalf of a Participant under the
Plan shall be payable form the general assets of the
Participant's employer.
X. Withdrawals. (a) For Hardship. A Participant may apply
to the Committee for a withdrawal on account of hardship of
any part or all of the vested portion of the funds allocated
to his Accounts under the Plan. The Committee shall
determine in its sole discretion whether a hardship exists
and, if so, the amount which may be withdrawn to meet such
hardship. For purposes of this Section, hardship shall be
deemed to have occurred only in the event the Participant
shall have incurred financial needs arising as a result of any
one or more of the reasons which are permitted to be treated
as a "hardship" for purposes of withdrawals from a Qualified
Plan meeting the requirements of Section 401(k) of the Code.
(b) After Termination of Employment. At any time after the
termination of a Participant's employment with the Company for any
reason, the Participant (or, in the event of his death, his
beneficiary) may elect to receive all benefits to which he is
entitled hereunder in a single lump sum in an amount which is equal
to 90% of the value of the benefits to which the
Participant or his beneficiary is otherwise entitled hereunder on
the date as of which such election is made.
XI. Termination of Employment. If the employment of a
Participant shall terminate for any reason, any amount due
such Participant under this Plan, to the extent then vested
as determined under each Qualified Plan separately, shall be
held under the terms of this Plan and paid in accordance with
the provisions of Section 9 of this Plan. If a
participant is not fully vested under the terms of a
Qualified Plan upon termination of his employment and
thereby forfeits his right to all or a percentage of his
benefits from such Qualified Plan, the Participant shall also
forfeit the same percentage of any benefits under this Plan
which are attributable to the Qualified Plan under which
benefits are thus forfeited.
XII. Beneficiary Designation. Each Participant shall be entitled
to designate in writing a beneficiary or beneficiaries to
receive the benefits, if any, which are payable under this
Plan in the event of the Participant's death and may change
the beneficiary designation at any time and from time to time.
If there shall be no beneficiary designated and surviving at
the Participant's death, the beneficiary of any benefits
payable from an Account under this Plan shall be the same
person or persons designated as beneficiary under the
Qualified plan with respect to which such benefits are payable
hereunder.
XIII. Nonassignable Rights. Except as otherwise provided by
this Plan, no right or benefit of a Participant under
this Plan may be assigned, encumbered, or transferred
in any manner.
XIV. Independence of Agreement. The benefits payable under this
Plan shall be independent of and in addition to any other
employment agreement that may exist from time to time
between the Company and any Participant or any other
compensation payable by the Company to the Participant
whether as salary, bonus, or otherwise. This Plan shall not
be deemed to constitute a contract of employment between any
Participant and the Company, nor shall any provision hereof
restrict the rights of any Participant to terminate his
employment.
XV. Trust Agreement. The Company has established the Crompton &
Knowles Corporation Benefit Equalization Plan Trust
Agreement (the "Trust Agreement") with Shawmut Bank, N.A. as
trustee (the "Trustee") and has contributed to the trust
established thereby assets to be held therein, subject to the
claims of the Company's creditors in the event of the
Company's insolvency (as therein defined), until paid to
participants in this Plan and their beneficiaries in the
manner and at the times specified in this Plan. All amounts
which the Company is obligated to allocate to Accounts of
Participants under the Plan shall be paid over or delivered to
the Trustee, to be held and invested as provided in the Trust
Agreement. Anything in the Plan to the contrary
notwithstanding, all benefits to which a Participant or his
beneficiary may become entitled under the Plan shall be
payable by the Trustee pursuant to the terms of the Trust
Agreement, and unless and until the Company becomes
insolvent (as defined in the Trust Agreement), the sole
obligation of the Company shall be to make contributions to
the Trustee as provided in this Section 15.
XVI. Non-Secured Promise. The rights of a Participant (or his
spouse or beneficiary, if applicable) under this Plan shall
be solely those of an unsecured creditor of the Company. No
Participant shall have any preferred claim on, or any
beneficiary ownership interest in, any asset acquired or
held by the Company in connection with liabilities assumed by
it under the Plan or any asset held by the Trustee under the
Trust Agreement prior to the time such assets are paid to the
Participant pursuant to the terms of the Plan or the Trust
Agreement, and all rights created under the Plan or the Trust
Agreement shall be mere unsecured contractual rights of the
Participant (or his spouse or beneficiary) against the Company
or the Trustee, as the case may be. XVII. Administration. The
Plan shall be administered by the Employee Benefits
Committee appointed from time to time by the Board of
Directors of Crompton & Knowles
Corporation. Except as limited by the express
provisions of the Plan or by the terms of the
resolution of the Board by which the Committee shall
have been established, the Committee shall have
authority and discretion to determine the rights and
benefits of Participants under the Plan, establish from
time to time regulations for the administration of the
Plan, interpret the Plan, and make all determinations
deemed necessary or advisable for the administration of
the Plan.
XVIII. Amendment or Termination. The Committee on Executive
Compensation of the Board of Directors of Crompton &
Knowles Corporation may amend, suspend, or terminate
the Plan or any portion thereof at any time; provided,
however, that no amendment, suspension, or termination of
the Plan shall adversely affect the right of a
Participant to any benefits which accrued pursuant to the
provisions of the Plan prior to the date such amendment,
suspension, or termination is adopted or becomes
effective.
XIX. Governing Law. The Plan shall be governed by and construed
in accordance with the laws of the State of Connecticut
insofar as such laws do not contravene Federal laws
applicable to the Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed by its officer thereunto duly authorized as of the 27th
day of January, 1994.
CROMPTON & KNOWLES CORPORATION
By:/s/ Marvin H. Happel
Marvin H. Happel
Title:
CROMPTON & KNOWLES CORPORATION EXHIBIT 10 (n)
BENEFIT EQUALIZATION PLAN TRUST AGREEMENT
This Agreement made this 20th day of October, 1993 by and
between Crompton & Knowles Corporation, a Massachusetts
corporation (the "Company"), and Shawmut Bank, N.A., a national
banking association organized and existing under the laws of the
United States of America (the "Trustee").
WITNESSETH:
WHEREAS, the Company has heretofore established a trust
pursuant to the Agreement and Declaration of Trust dated as of
January 12, 1988 (the "Prior Trust Agreement") by and between the
Company and Shawmut Worcester County Bank, N.A., now known as
Shawmut Bank, N.A.;
WHEREAS, pursuant to the provisions of Section 13 of the Prior
Trust Agreement, the Company wishes to amend the Prior Trust
Agreement in its entirety and to substitute therefor the following
Trust Agreement;
WHEREAS, the Company has adopted the nonqualified deferred
compensation plans listed in Appendix A hereto and may adopt
similar plans or arrangements in the future (individually, a "Plan"
and collectively, the "Plans");
WHEREAS, the Company has incurred or expects to incur
liability under the terms of the Plans with respect to the
individuals participating therein;
WHEREAS, the Company wishes to contribute to the trust
established hereby (the "Trust") assets that shall be held
therein, subject to the claims of the Company's creditors in the
event of the Company's Insolvency (as herein defined), until paid
to Plan participants and their beneficiaries in such manner and at
such times as specified in the Plans;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the
status of any of the Plans as an unfunded plan maintained for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title I
of the Employee Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a source of funds
to assist it in meeting its liabilities under the Plans;
NOW, THEREFORE, the Company does hereby amend the Prior Trust
Agreement in its entirety and does substitute therefor the Trust as
set forth herein, the Trustee agrees to act as Trustee of the
Trust, and the Company and the Trustee do hereby agree that the
Trust shall be comprised, held, and disposed of as follows:
Section (i. Establishment of Trust
(a) The Company hereby deposits with the Trustee in trust the
sum of $10.00, which shall become the principal of the Trust to be
held, administered, and disposed of by the Trustee as provided in
this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which the
Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon,
shall be held separate and apart from other funds of the Company
and shall be used exclusively for the uses and purposes of Plan
participants and general creditors of the Company as herein set
forth. Plan participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any
assets of the Trust. Any rights created under the Plans and this
Trust Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against the Company. Any
assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) hereof.
(e) The Company shall, from time to time, make
contributions to the Trust in amounts that are sufficient to pay
each Plan participant or beneficiary the benefits to which Plan
participants or their beneficiaries shall be entitled pursuant to
the terms of each Plan. Such contributions shall be irrevocable
except as provided in Section 4 hereof.
Section (ii. Payments to Plan Participants
and Their Beneficiaries
(a) The Trustee shall keep such records and maintain such
books and accounts as shall at all times be sufficient to
indicate, for accounting purposes, the proportionate part of the
Trust fund as constituted from time to time which is held by it for
each Plan participant under each Plan. For this purpose only, the
Trustee shall create and maintain a separate account for each Plan
participant (and such sub-accounts as may be
contemplated by any Plan) and shall credit thereto all
contributions made by the Company to fund benefits payable to such
Plan participant and shall charge thereto all payments made to or
for the account of such Plan participant. Anything in the
foregoing to the contrary notwithstanding, no Plan participant
shall have a preferred claim on, or any beneficial interest in, the
account maintained for him by the Trustee or any assets of the
Trust fund allocated thereto for accounting purposes. The Trustee
may hold the Trust fund as a single fund, regardless of how many
Plans and/or Plan participants are participating
hereunder, and may from time to time invest and reinvest the
commingled assets and receive the income and proceeds thereof and
make payments therefrom, all without regard to the source of any
part of the commingled assets.
(b) The Company shall from time to time deliver to the
Trustee a schedule (the "Payment Schedule") that indicates the
amounts payable in respect of each Plan participant (and his or her
beneficiaries), or that provides a formula or other
instructions acceptable to the Trustee for determining the
amounts so payable, the form in which such amount is to be paid (as
provided for or available under the Plans), and the time of
commencement of payment of such amounts. Except as otherwise
provided herein, the Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with such
Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state, or local taxes
that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plans and shall pay amounts
withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld, and paid
by the Company.
(c) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plans shall be determined by
the Company or such party as it shall designate under the Plans,
and any claim for such benefits shall be considered and reviewed
under the procedures set out in the Plans.
(d) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the
terms of any Plan. The Company shall notify the Trustee of its
decision to make payment of benefits directly prior to the time
amounts are payable to Plan participants or their
beneficiaries. In addition, if the principal of the Trust, and any
earnings thereon, are not sufficient to make payments of benefits
in accordance with the terms of any Plan, the Company shall make
the balance of each such payment as it falls due. The Trustee
shall notify the Company when principal and earnings of the Trust
are not sufficient to make payments as provided in Section 2(b)
above.
Section (iii. Trustee Responsibility Regarding
Payments to Trust Beneficiary When Company
Is Insolvent
(a) The Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent.
The Company shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) the Company is unable to pay its debts as
they become due, or (ii) the Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below:
(1) The Board of Directors and the Chief
Executive Officer of the Company shall have the duty to
inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of
the Company alleges in writing to the Trustee that the
Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending
such determination, the Trustee shall discontinue
payment of benefits to Plan participants or their
beneficiaries.
(2) Unless the Trustee has actual knowledge of
the Company's Insolvency, or has received notice from
the Company or a person claiming to be a creditor
alleging that the Company is Insolvent, the Trustee
shall have no duty to inquire whether the Company is
Insolvent. The Trustee may in all events rely on such
evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee
with a reasonable basis for making a determination
concerning the Company's solvency.
(3) If at any time the Trustee has determined
that the Company is Insolvent, the Trustee shall
discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust
for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their
beneficiaries to pursue their rights as general
creditors of the Company with respect to benefits due
under the Plans or otherwise.
(4) The Trustee shall resume the payment of
benefits to Plan participants or their beneficiaries in
accordance with Section 2 of this Trust Agreement only
after the Trustee has determined that the Company is
not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plans
for the period of such discontinuance, less the aggregate amount of
any payments made to Plan participants or their beneficiaries by
the Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
Section 4. Payments to Company.
Except as provided in Section 3 hereof, after the Trust has
become irrevocable, the Company shall have no right or power to
direct the Trustee to return to the Company or to divert to others
any of the Trust assets before all payment of benefits have been
made to Plan participants and their beneficiaries pursuant to the
terms of the Plans, except that in the event any benefits otherwise
payable to a Plan participant are forfeited under the terms of any
Plan, the Trustee shall, in accordance with the instructions of the
Company certified to be in
accordance with the applicable Plan, return the amount of any such
forfeited Benefits to the Company (unless the Company shall then be
Insolvent).
Section 5. Investment Authority
(a) The Trustee shall from time to time inform the Company
and each Plan participant as to the investment media available for
investment of the Trust fund, including stock, bonds,
securities, and other property (which may include interests in
trust funds that have been or shall hereafter be created and
maintained by the Trustee as trustee for the collective
investment of trust funds), shares or other interests in open-end
management investment companies (including without limitation any
company to which the Trustee or any affiliate of the Trustee
provides advice and/or other services for which such company pays
the Trustee or its affiliate compensation), and insurance
policies on the lives of Plan participants. After consulting with
each Plan participant, the Company shall direct in writing how
contributions made to the Trustee for the account of such Plan
Participant under each Plan and the portion of the Trust fund which
is from time to time allocated to the account
established and maintained for such Plan participant under each
such Plan pursuant to Section 2(a) shall be invested among the
investment media from time to time offered by the Trustee for
investment of the Trust fund.
(b) The Trustee may invest in securities (including stock or
rights to acquire stock) or obligations issued by the Company. All
rights associated with assets of the Trust shall be exercised by
the Trustee or the persons designated by the Trustee, and shall in
no event be exercisable by or rest with Plan
participants.
(c) The Company shall have the right at any time, and from
time to time in its sole discretion, to substitute assets of equal
fair market value for any asset held by the Trust. This right is
exercisable by the Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity.
Section 6. Disposition of Income
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, and all gains and losses on
investments of the Trust shall be allocated to the accounts
maintained for Plan participants pursuant to Section 2(a) hereof.
Section 7. Accounting by
Trustee
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between the Company and the Trustee. Within
90 days following the close of each calendar year and within 90
days after the removal or resignation of the Trustee, the Trustee
shall deliver to the Company a written account of its
administration of the Trust during such year or during the period
from the close of the last preceding year to the date of such
removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued
interest paid or receivable being shown separately), and showing
all cash, securities, and other property held in the Trust at the
end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. Responsibility of Trustee
(a) The Trustee shall act with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with
like aims, provided, however, that the Trustee shall incur no
liability to any person for any action taken pursuant to a
direction, request, or approval given by the
Company which is contemplated by, and in conformity with, the terms
of the Plans or this Trust and is given in writing by the Company.
In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Company agrees to
indemnify the Trustee against the Trustee's costs, expenses, and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments. If the Company does not pay such costs, expenses, and
liabilities in a reasonably timely manner, the Trustee may obtain
payment from the Trust.
(c) The Trustee may consult with legal counsel (who may also
be counsel for the Company generally) with respect to any of its
duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants, or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly
provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, the Trustee
shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor Trustee, or
to loan to any person the proceeds of any borrowing against such
policy.
(f) However, notwithstanding the provisions of Section 8(e)
above, the Trustee may loan to the Company the proceeds of any
borrowing against an insurance policy held as an asset of the
Trust.
(g) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Internal Revenue Code.
Section 9. Compensation and Expenses of Trustee
The Company shall pay all administrative and Trustee's fees
and expenses. If not so paid, the fees and expenses shall be paid
from the Trust.
Section 10. Resignation and Removal of Trustee
(a) The Trustee may resign at any time by written notice to
the Company, which shall be effective 60 days after receipt of such
notice unless the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 60 days
notice or upon shorter notice accepted by the Trustee.
(c) In the event of a Change of Control, as defined herein,
the Trustee may not be removed by the Company for two years
thereafter.
(d) If the Trustee resigns or is removed within two years of
a Change of Control, as defined herein, the Trustee shall select a
successor Trustee in accordance with the provisions of Section
11(b) hereof prior to the effective date of the Trustee's
resignation or removal.
(e) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets of the Trust shall
subsequently be transferred to the successor Trustee. The
transfer shall be completed within 60 days after receipt of notice
of resignation, removal, or transfer unless the Company extends the
time limit.
(f) If the Trustee resigns or is removed, a successor shall
be appointed, in accordance with Section 11 hereof, by the
effective date of resignation or removal under paragraphs (a) or
(b) of this section. If no such appointment has been made, the
Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of
the Trustee in connection with any such proceeding shall be allowed
as administrative expenses of the Trust.
Section 11. Appointment of Successor Trustee
(a) If the Trustee resigns or is removed in accordance with
Section 10(a) or (b) hereof, the Company may appoint any third
party, such as a bank trust department or other party that may be
granted corporate trustee powers under state law, as a successor to
replace the Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new
Trustee, who shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust assets. The
former Trustee shall execute any instrument necessary or reasonably
requested by the Company or the successor Trustee to evidence the
transfer.
(b) If the Trustee resigns or is removed pursuant to the
provisions of Section 10(d) hereof and selects a successor
Trustee, the Trustee may appoint any third party such as a bank
trust department or other party that may be granted corporate
trustee powers under state law. The appointment of a successor
Trustee shall be effective when accepted in writing by the new
Trustee. The new Trustee shall have all the rights and powers of
the former Trustee, including ownership rights in Trust assets. The
former Trustee shall execute any instrument necessary or reasonably
requested by the successor Trustee to evidence the transfer.
(c) The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing
Trust assets, subject to Sections 7 and 8 hereof. The successor
Trustee shall not be responsible for, and the Company shall
indemnify and defend the successor Trustee from, any claim or
liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing at
the time it becomes successor Trustee.
Section 12. Amendment or Termination
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company.
Notwithstanding the foregoing, no such amendment shall conflict
with the terms of the Plans or shall make the Trust revocable after
it has become irrevocable in accordance with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which
Plan participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plans. Upon termination of
the Trust any assets remaining in the Trust shall be returned to
the Company.
(c) Upon written approval of Plan participants or
beneficiaries entitled to payment of benefits pursuant to the terms
of the Plans, the Company may terminate this Trust prior to the
time all benefit payments under the Plans have been made. All
assets in the Trust at termination shall be returned to the
Company.
Section 13. Miscellaneous
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition, without
invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered, or subjected to attachment, garnishment, levy,
execution, or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts.
(d) For purposes of this Trust, Change of Control shall mean
a change in control of the Company of a nature that would be
required to be reported in response to Item 1(a) of the Current
Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a
"Change of Control" shall be deemed to have occurred if: (i) a
third person, including a "group" as such term is used in Section
13(d)(3) of the Exchange Act, other than the trustee of any
employee benefit plan of the Company, becomes the beneficial owner,
directly or indirectly, of 20% or more of the combined voting power
of the Company's outstanding voting securities ordinarily having
the right to vote for the election of directors of the Company;
(ii) during any period of 24 consecutive months individuals who, at
the beginning of such consecutive 24-month period, constitute the
Board of Directors of the Company (the "Board" generally and as of
the date hereof the "Incumbent
Board") cease for any reason (other than retirement upon reaching
normal retirement age, disability, or death) to constitute at least
a majority of the Board; provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least three quarters of the directors
comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest
relating to the election of the directors of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act) shall be, for purposes of this Trust Agreement,
considered as though such person were a member of the Incumbent
Board; or (iii) the Company shall cease to be a publicly owned
corporation having its outstanding Common Stock listed on the New
York Stock Exchange or quoted in the NASDAQ National Market System.
(e) The Board of Directors and the Chief Executive Officer of
the Company shall have the duty to inform the Trustee in writing
that a Change of Control of the Company has occurred. If a
participant or beneficiary alleges in writing to the Trustee that
a Change of Control has occurred, the Trustee shall have no duty to
inquire whether a Change of Control has occurred. The Trustee may
in all events rely on such evidence concerning a Change of Control
as may be furnished to the Trustee and that provides the Trustee
with a reasonable basis for making a
determination that a Change of Control has occurred.
Section 14. Effective Date
The effective date of this Trust Agreement shall be October
20, 1993.
IN WITNESS WHEREOF, the Company and the Trustee have caused
this Trust Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
CROMPTON & KNOWLES CORPORATION
By:/s/ Marvin H. Happel
Marvin H. Happel
Its Vice President-Organization
SHAWMUT BANK, N.A.
By:/s/ Lois E. Uliana
Lois E. Uliana
Assistant Vice President
CROMPTON & KNOWLES CORPORATION EXHIBIT 10 (o)
1988 LONG TERM INCENTIVE PLAN
Section 1. Purpose
The purpose of the Plan is to attract and retain key
employees of the Company and its Subsidiaries and to motivate such
employees to put forth maximum efforts for the success of the
business by offering them long term performance-based incentives
and an opportunity to acquire ownership of the Company's Stock.
Section 2. Definitions
For purposes of the Plan, the following terms shall have
the meanings set forth below:
(a) "Board" means the Board of Directors of the
Company.
(b) "Change in Control", "Potential Change in Control",
and "Change in Control Price" have the meanings set forth
in Sections 10(b), (c), and (d), respectively.
(c) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(d) "Commission" means the Securities and Exchange
Commission or any successor agency.
(e) "Committee" means the Committee referred to in
Section 3.
(f) "Company" means Crompton & Knowles Corporation, a
corporation organized under the laws of the Commonwealth of
Massachusetts, or any successor corporation.
(g) "Disability" means permanent and total disability
as determined under procedures established by the Committee
for purposes of the Plan.
(h) "Disinterested Person" shall have the meaning set
forth in Rule 16b-3(d)(3), as promulgated by the Commission
under the Exchange Act, or any successor definition adopted by the
Commission.
(i) "Early Retirement" means retirement, with the
consent for purposes of the Plan of the Committee or such
officer of the Company as may be designated from time to time by
the Committee, from active employment with the Company or
a Subsidiary prior to Normal Retirement.
(j) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
(k) "Fair Market Value" means, except as provided in
Section 7(b), the mean, as of any given date, between the
highest and lowest reported sales prices of the Stock on the New
York Stock Exchange Composite Index on such date (or, if
there is no reported sale on such date, on the last
preceding date on which any reported sale occurred), or if no such
reported sales prices are available, the fair market value
of the Stock as determined by the Committee in good faith.
(l) "Incentive Stock Option" means any Stock Option
intended to be and designated as an "incentive stock
option" within the meaning of Section 422A of the Code.
(m) "Long Term Performance Award" or "Long Term Award"
means an award under Section 9.
(n) "Non-Qualified Stock Option" means any Stock Option
that is not an Incentive Stock Option.
(o) "Normal Retirement" means retirement from active
employment with the Company or a Subsidiary at or after age
65.
(p) "Plan" means the Crompton & Knowles Corporation
1988 Long Term Incentive Plan, as set forth herein and as
hereafter amended from time to time.
(q) "Restricted Stock" means an award under Section 8.
(r) "Retirement" means Normal or Early Retirement.
(s) "Rule 16b-3" means Rule 16b-3 as promulgated by the
Commission under Section 16(b) of the Exchange Act, as
amended from time to time.
(t) "Stock" means the Common Stock, $1.00 par value, of
the Company.
(u) "Stock Appreciation Right" means a right granted
under Section 7.
(v) "Stock Option" or "Option" means an option granted
under Section 6.
(w) "Subsidiary" means any business entity in which the
Company, directly or indirectly, owns 50 percent or more of
the total combined voting power of all classes of stock or other
equity interest.
Section 3. Administration
The Plan shall be administered by the Committee on
Executive Compensation of the Board, or such other committee of the
Board, composed of not less than three Disinterested Persons, as
shall be designated by the Board from time to time. If at any time
no Committee designated to administer the Plan shall be in office,
the functions of the Committee specified in the Plan shall be
exercised by the Board.
Except as limited by the express provisions of the Plan,
the Committee shall have the sole and complete authority:
(a) to select the officers and other key employees to
whom Stock Options, Stock Appreciation Rights, Restricted
Stock, and Long Term Performance Awards may from time to time be
granted;
(b) to determine whether and to what extent Incentive
Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Long Term Performance
Awards, or any combination thereof are to be granted,
hereunder;
(c) to determine the number of shares to be covered by
each award granted hereunder;
(d) to determine the terms and conditions of any award
granted hereunder (including, but not limited to, the share
price, any restriction or limitation, and any vesting acceleration
or forfeiture waiver regarding any Stock Option or other
award and the shares of Stock relating thereto), based on
such factors as the Committee shall determine;
(e) to adjust the performance goals and measurements
applicable to performance-based awards pursuant to the
terms of the Plan; and
(f) to determine to what extent and under what
circumstances Stock and other amounts payable with respect
to an award shall be deferred.
The Committee shall have the authority to adopt, alter, and
repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable, to
interpret the terms and provisions of the Plan and any award issued
under the Plan (and any agreement relating thereto), and otherwise
to supervise the administration of the Plan. The Committee may act
only by a majority of its members then in office, except that the
members thereof may authorize any one or more of their number or
any officer of the Company to execute and deliver documents on
behalf of the Committee. Any determination made by the Committee
pursuant to the provisions of the Plan with respect to any award
shall be made in its sole discretion at the time of the grant of
the award or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee
pursuant to the provisions of the Plan shall be final and binding
on all persons, including the Company Plan participants.
Section 4. Stock Subject to Plan
The total number of shares of Stock reserved and available
for distribution pursuant to Stock Options or other awards under
the Plan shall be 334,582 shares plus such number of shares of
Stock previously approved by the stockholders of the Company for
issuance pursuant to the Company's 1983 Stock Option Plan as are
not used under such plan. Such shares may consist, in whole or in
part, of authorized and unissued shares or issued shares
heretofore or hereafter reacquired and held as treasury shares.
Upon the exercise of a Stock Appreciation Right, the full number of
shares to which the Stock Appreciation Right relates shall be
deemed to have been distributed under the Plan, and upon the
payment of a Long Term Performance Award in the form of cash, the
full number of shares that could have been purchased with such cash
at the Fair Market Value of the Stock on the date of such payment
shall be deemed to have been distributed under the Plan. If the
outstanding Stock Option or Stock Appreciation Right shall expire
or terminate without having been exercised in full, or if any
Restricted Stock award or Long Term Performance Award is forfeited
in whole or in part, the shares subject to the unexercised or
forfeited portion of such award shall again be available for
distribution in connection with awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, or other change in
corporate structure affecting the Stock, such substitution or
adjustments shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding Stock Options, in the
determination of the amount payable upon exercise of outstanding
Stock Appreciation Rights, and in the number of shares subject to
other outstanding awards granted under the Plan as may be
determined by the Committee, in its sole discretion, to be
equitable to prevent substantial dilution or enlargement of the
rights granted to participants hereunder, provided, however, that
the number of shares subject to any award will always be a whole
number. The Committee shall give notice to each participant of any
adjustment made pursuant to this paragraph, and upon such notice,
such adjustment shall be effective and binding for all purposes of
the Plan.
Section 5. Eligibility
Officers and other key employees of the company and its
Subsidiaries (but excluding members of the Committee and any person
who serves only as a director) who in the opinion of the Committee
are responsible for or contribute to the management, growth, and
profitability of the business of the Company or its Subsidiaries
are eligible to be granted awards under the Plan.
Section 6. Stock Options
Stock Options may be granted alone or in addition to other
awards granted under the Plan and may be of two types: Incentive
Stock Options and Non-Qualified Stock Options. Any Stock Option
granted under the Plan shall be in such form as the Committee may
from time to time approve. The Committee shall have the authority
to grant any optionee Incentive Stock Options, Non-Qualified Stock
Options, or both types of Stock Options (in each case with or
without Stock Appreciation Rights). To the extent that any Stock
Option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option. The Committee
shall not grant Stock Options to any one individual with respect to
more than twenty-five percent (25%) of the shares of Stock reserved
for distribution pursuant to Stock Options or other awards under
the Plan.
Stock Options shall be evidenced by option agreements, the
terms and provisions of which may differ. An option agreement
shall indicate on its face whether it is an agreement for Incentive
Stock Options or Non-Qualified Stock Options. The grant of a Stock
Option shall occur on the date the Committee by resolution selects
an employee as a participant in any grant of Stock Options,
determines the number of Stock Options to be granted to such
employee, and specifies the terms and provisions of the option
agreement; provided, however, that the Committee may designate in
such resolution a later date as the date of grant of any or all of
the Stock Options covered thereby. The Company shall notify a
participant of any grant of Stock Options, and a written option
agreement or agreements shall be duly executed between the Company
and the participant.
Anything in the Plan to the contrary notwithstanding, no
term of the Plan relating to Incentive Stock Options shall be
interpreted, amended, or altered nor shall any discretion or
authority granted under the Plan be exercised so as to disqualify
the Plan under Section 422A of the Code or, without the consent of
the optionee affected, to disqualify any Incentive Stock Option
under such Section 422A.
Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional
terms and conditions as the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be equal to the Fair
Market Value of the Stock on the date of grant or such higher price
as shall be determined by the Committee at grant.
(b) Option Term. The term of each Stock Option shall
be fixed by the Committee, but no incentive Stock Option
shall be exercisable more than 10 years after the date of grant of
the Option, and no Non-Qualified Stock Option shall be
exercisable more than 10 years and one month after the date
of grant of the Option.
(c) Exercisability. Stock Options shall be exercisable
at such time or times and subject to such terms and
conditions as shall be determined by the Committee; provided,
however, that, except as provided in Sections 6(f), (g),
(h), and 10, no Stock Option shall be exercisable prior to the
first anniversary date of the granting of the Stock Option.
If the Committee provides that any Stock Option is
exercisable only in installments, the Committee may at any time
waive such installment exercise provisions, in whole or in
part, based on such factors as the Committee may determine.
(d) Method of Exercise. Subject to the provisions of
this Section 6, Stock Options may be exercised, in whole or
in part, at any time during the option term by giving written
notice of exercise to the Company specifying the number of
shares to be purchased. Such notice shall be accompanied
by payment in full of the purchase price in cash (including check,
bank draft, money order, or such other instrument as the
Company may accept). Unless otherwise determined by the
Committee at any time or from time to time, payment in full or in
part may also be made (i) by delivering a duly executed
notice of exercise together with irrevocable instructions by the
optionee to a broker to deliver promptly to the Company
sufficient proceeds from a sale or loan of the shares
subject to the Stock Option to pay the purchase price, or (ii) in
the form of unrestricted Stock already owned by the
optionee or, in the case of the exercise of a Non-Qualified Stock
Option, Restricted Stock subject to an award hereunder
(based, in each case, on the Fair Market Value of the Stock
on the date the Stock Option is exercised). If payment of the
option exercise price of a Non-Qualified Stock Option is
made in whole or in part in the form of Restricted Stock, such
Restricted Stock (and any replacement shares relating thereto)
shall remain restricted in accordance with the original
terms of the Restricted Stock award in question, and any additional
Stock received upon the exercise shall be subject to the
same forfeiture restrictions, unless otherwise determined
by the Committee.
No shares of Stock shall be issued until full payment
therefor has been made. Subject to any forfeiture
restrictions that may apply if a Stock Option is exercised using
Restricted Stock, an optionee shall have all of the rights
of a stockholder of the Company, including the right to vote the
shares and the right to receive dividends, with respect to
shares subject to the Stock Option when the optionee has
given written notice of exercise, has paid in full for such shares,
and, if requested, has given the representation described
in Section 13(a).
(e) Non-transferability of Options. No Stock Option
shall be transferable by the optionee other than by will or
by the laws of descent and distribution, and all Stock Options
shall be exercisable, during the optionee's lifetime, only
by the optionee or by the guardian or legal representative of the
optionee, it being understood that the terms "holder" and
"optionee" include the guardian and legal representative of
the optionee named in the option agreement and any person to whom
an option is transferred by will or the laws of descent and
distribution. Shares issued upon exercise of a Stock
Option shall be issued in the name of the optionee or, at the
request of the optionee, in the name of such optionee and
the optionee's spouse with right of survivorship.
(f) Termination by Death. Subject to Section 6(j), if
an optionee's employment terminates by reason of death, any
Stock Option held by such optionee may thereafter be exercised, to
the extent then exercisable or on such accelerated basis as
the Committee may determine, for a period of two years from
the date of such death or until the expiration of the stated term
of such Stock Option, whichever period is the shorter.
(g) Termination by Reason of Disability. Subject to
Section 6(j), if an optionee's employment terminates by
reason of Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it
was exercisable at the time of termination or on such
accelerated basis as the Committee may determine, for a period of
two years from the date of such termination of employment
or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that, if
the optionee dies within such two-year period, any
unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such two-year period,
continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months
from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes
of Section 422A of the Code, such Stock Option will
thereafter be treated as Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. Subject to
Section 6(j), if an optionee's employment terminates by
reason of Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it
was exercisable at the time of Retirement or on such
accelerated basis as the Committee may determine, for a period of
three years from the date of such termination of employment
or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that, if
the optionee dies within such three-year period, any
unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such three-year period,
continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months
from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
In the event of termination of employment by reason of
Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes
of Section 422A of the Code, such Stock Option will
thereafter be treated as a Non-Qualified Stock Option.
(i) Other Termination. Subject to Section 6(j), if an
optionee's employment terminates for any reason other than
death, Disability, Retirement, or cause, any Stock Option held by
such optionee may thereafter be exercised by the optionee,
to the extent it was exercisable at the time of
termination, for a period of three months from the date of such
termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter;
provided, however, that if the optionee dies within such
three-month period, any unexercised Stock Option held by
such optionee shall, notwithstanding the expiration of such
three-month period, continue to be exercisable to the
extent to which it was exercisable at the time of death for a
period of 12 months from the date of such death or until
the expiration of the stated term of such Stock Option,
whichever period is the shorter. If an optionee's employment is
terminated for cause, all rights under any Stock Option
held by such optionee shall expire immediately upon the giving to
the optionee of notice of such termination, unless
otherwise determined by the Committee.
(j) Incentive Stock Option Limitations. To the extent
required for "incentive stock option" status under Section
422A of the Code, the aggregate Fair Market Value (determined as of
the time of grant) of the Stock with respect to which
Incentive Stock Options granted after 1986 are exercisable
for the first time by an optionee during any calendar year under
the Plan and any other stock option plan of the Company or
any subsidiary or parent corporation (within the meaning of
Section 425 of the Code) after 1986 shall not exceed $100,000. In
the event a portion of a Stock Option designated as an
Incentive Stock Option exceeds said $100,000 limitation, such
portion shall be treated as a Non-Qualified Stock Option.
The Committee is authorized to provide at grant that,
to the extent permitted under Section 422A of the Code, if
a participant's employment with the Company and its Subsidiaries is
terminated by reason of death, Disability or Retirement and
the portion of any Incentive Stock Option that is otherwise
exercisable during the post-termination period specified under
Sections 6(f), (g), or (h), applied without regard to this
Section 6(j), is greater than the portion of such option that is
exercisable as an "incentive stock option" during such
post-termination period under Section 422A, such
post-termination period shall automatically be extended (but not
beyond the stated term of such Stock Option) to the extent
necessary to permit the optionee to exercise such Incentive Stock
Option (either as an Incentive Stock Option or, if exercised
after the expiration periods that apply for the purposes of
Section 422A, as a Non-Qualified Stock Option). The Committee is
also authorized to provide at grant for a similar extension
of the post-termination exercise period in the event of a
Change in Control or a Potential Change in Control.
(k) Cashing Out of Options. In an case when a Stock
Option is exercised after the death of an optionee, the
Committee may elect to cash out all or any part of the Stock Option
by paying the person to whom the Stock Option has been
transferred by reason of the death of the Optionee an
amount, in cash or shares of Stock, equal in value to the excess of
the Fair Market Value of the Stock over the option price on
the effective date of such cash out.
(l) Substitute Options. Stock Options or Stock
Appreciation Rights may be granted under the Plan from time
to time in substitution for stock options or stock appreciation
rights held by employees of any corporation who, as the
result of a merger, consolidation, or combination of such
other corporation with, or the acquisition of all or substantially
all of the assets or stock of such other corporation by,
the Company or a Subsidiary, become employees of the Company or a
Subsidiary. The terms and conditions of any substitute
Stock Options or Stock Appreciation Rights so granted may
vary from the terms and conditions set forth in the Plan to such
extent as the Committee at the time of grant may deem
appropriate to conform, in whole or in part, to the
provisions of the stock options or stock appreciation rights in
substitution for which they are granted; provided, however,
that in the event a stock option for which a substitute Stock
Option is being granted is an incentive stock option, no
such variation shall be permitted the effect of which would
be to adversely affect the status of any such substitute Stock
Options as an Incentive Stock Option.
Section 7. Stock Appreciation Rights
A Stock Appreciation Right may be granted in conjunction
with all or part of any Stock Option granted under the Plan. In
the case of a Non-Qualified Stock Option, such Right may be granted
either at or after the time of grant of such Stock Option. In the
case of an Incentive Stock Option, such Right may be granted only
at the time of grant of such Stock Option. A Stock Appreciation
Right independent of a Stock Option grant may also be awarded by
the Committee, in which event the provisions of this Section 7
shall be applied for purposes of determining the operation of such
Stock Appreciation Right as if a Non-Qualified Stock Option had
been granted on the date of the grant of and in conjunction with
such independent Stock Appreciation Right.
A Stock Appreciation Right granted with respect to a given
Stock Option shall terminate and no longer be exercisable to the
extent of the shares with respect to which the related Stock Option
is exercised or terminates. A Stock Appreciation Right may be
exercised by an optionee in accordance with the provisions of this
Section 7 by surrendering the applicable portion of the related
Stock Option in accordance with procedures established by the
Committee. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed
in Section 7(b). The Stock Option which has been so surrendered
shall no longer be exercisable to the extent the related Stock
Appreciation Right has been exercised.
Stock Appreciation Rights shall be subject to such terms
and conditions as shall be determined by the Committee, including
the following:
(a) Exercisability. A Stock Appreciation Right shall
be exercisable only at such time or times and to the extent
that the Stock Option to which it relates is exercisable in
accordance with the provisions of Section 6 and this
Section 7; provided, however, that a Stock Appreciation Right shall
not be exercisable during the first six months of its term
by an optionee who is actually or potentially subject to
Section 16(b) of the Exchange Act, unless otherwise determined by
the Committee in the event of death or Disability of the
optionee prior to the expiration of the six-month period.
(b) Payment Upon Exercise. Upon the exercise of a
Stock Appreciation Right, an optionee shall be entitled to
receive an amount in cash, shares of Stock, or both equal in value
to the excess of the Fair Market Value on the date of
exercise of one share of Stock over the option exercise price per
share specified in the related Stock Option multiplied by
the number of shares in respect of which the Stock
Appreciation Right shall have been exercised. The Committee shall
have the right to determine the form of payment in each
case.
In the case of a Stock Appreciation Right held by an
optionee who is actually or potentially subject to Section
16(b) of the Exchange Act, the Committee:
(i) may require that such Stock Appreciation
Right be exercised only in accordance with the
applicable "window period" provisions of Rule 16b-3; and
(ii) in the case of a Stock Appreciation Right
relating to a Non-Qualified Stock Option, may provide
that the amount to be paid upon exercise of such Stock Appreciation
Right during a Rule 16b-3 "window period" shall be
based on the highest mean sales price of the Stock as
reported on the New York Stock Exchange Composite Index on any day
during such "window period".
(c) Non-transferability. A Stock Appreciation Right
shall be transferable only when and to the extent that the
related Stock Option would be transferable under Section 6(e).
(d) Effect of Change in Control. The Committee may
provide, at the time of grant, that a Stock Appreciation
Right can be exercised only in the event of a Change in Control or
a Potential Change in Control, subject to such terms and
conditions as the Committee may specify at grant. The
Committee may also provide that, in the event of a Change in
Control or a Potential Change in Control, the amount to be
paid upon the exercise of a Stock Appreciation Right shall be based
on the Change in Control Price, subject to such terms and
conditions as the Committee may specify at grant.
Section 8. Restricted Stock
(a) Administration. Shares of Restricted Stock may be
issued either alone or in addition to other awards granted
under the Plan. The Committee shall determine the officers and key
employees to whom and the time or times at which grants of
Restricted Stock will be made, the number of shares to be
awarded, the time or times within which such awards may be subject
to forfeiture, and any other terms and conditions of the
awards, in addition to those contained in Section 8(c).
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other
factors or criteria as the Committee shall determine. The
provisions of Restricted Stock awards need not be the same with
respect to each recipient.
(b) Awards and Certificates. Each participant
receiving a Restricted Stock award shall be issued a
certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such
participant and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such
award, substantially in the following form:
"The transferability of this certificate and the shares
of stock represented hereby are subject to the terms
and conditions (including forfeiture) of the Crompton & Knowles
Corporation 1988 Long Term Incentive Plan and a
Restricted Stock Agreement. Copies of such Plan and
Agreement are on file at the offices of Crompton & Knowles
Corporation, One Station Place, Metro Center, Stamford,
Connecticut 06902."
The Committee may require that the certificates evidencing
such shares be held in custody by the Company until the
restrictions thereon shall have lapsed and that, as a condition of
any Restricted Stock award, the participant shall have
delivered a stock power, endorsed in blank, relating to the
Stock covered by such award.
(c) Terms and Conditions. Shares of Restricted Stock
shall be subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and
the Restricted Stock Agreement referred to in Section
8(c)(vi), during such period commencing with the date of such award
as shall be set by the Committee (the "Restriction
Period"), the participant shall not be permitted to sell,
assign, transfer, pledge, or otherwise encumber shares of
Restricted Stock. Within these limits, the Committee
may provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions, in whole or
in part, based on service, performance, and such other
facts or criteria as the Committee may determine.
(ii) Except as provided in Section 8(c)(i), the
participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a stockholder of the
Company, including the right to vote the shares and the
right to receive any cash dividends thereon; provided, however,
that the Committee may provide at the time of an award
that cash dividends shall be automatically deferred and
reinvested in additional Restricted Stock. Dividends on Restricted
Stock which are payable in Stock shall be paid in the
form of additional shares of Restricted Stock.
(iii) Except to the extent otherwise provided in
the applicable Restricted Stock Agreement and Sections
8(c)(i) and (iv), upon termination of a participant's employment
for any reason during the Restriction Period, all
shares still subject to restriction shall be forfeited by the
participant.
(iv) In the event of the death of a participant
during the Restriction Period or in the event of
hardship or other special circumstances of a participant whose
employment is involuntarily terminated (other than for
cause) during the Restriction Period, the Committee may waive in
whole or in part any or all remaining restrictions with
respect to such participant's shares of Restricted
Stock.
(v) If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock
subject to such Restriction Period, unlegended certificates for
such shares shall be delivered to the participant.
(vi) Each award shall be confirmed by, and be
subject to the terms of, a Restricted Stock Agreement.
Section 9. Long Term Performance Awards
(a) Awards and Administration. Long Term Performance
Awards may be awarded either alone or in addition to other
awards granted under the Plan. The Committee shall determine the
nature, length, and starting date of the performance period
(the "Performance Period") for each Long Term Performance
Award, which shall be at least two years (subject to Section 10),
and shall determine the performance objectives to be used
in valuing Long Term Performance Awards and determining the
extent to which such Long Term Performance Awards have been earned.
Performance objectives may vary from participant to
participant and between groups of participants and shall be based
upon such Company, Subsidiary, business unit, or individual
performance factors or criteria as the Committee may deem
appropriate, including, but not limited to, earnings per share or
return on equity. Performance Periods may overlap and
participants may participate simultaneously with respect to
Long Term Performance Awards that are subject to different
Performance Periods and different performance factors and
criteria. Long Term Performance Awards shall be confirmed by,
and be subject to the terms of, a Long Term Performance Award
Agreement. The terms of such awards need not be the same
with respect to each participant.
At the beginning of each performance Period, the
Committee shall determine for each Long Term Performance
Award subject to such Performance Period the range of dollar values
or number of shares of Stock (including Restricted Stock)
to be awarded to the participant at the end of the
Performance Period if and to the extent that the relevant measures
of performance for such Long Term Performance Award are
met. Such dollar values or number of shares of Stock may be fixed
or may vary in accordance with such performance or other
criteria as may be determined by the Committee.
(b) Adjustment of Awards. The Committee may adjust the
performance goals and measurements applicable to Long Term
Performance Awards to take into account changes in law and
accounting and tax rules and to make such adjustments as the
Committee deems necessary or appropriate to reflect the
inclusion or exclusion of the impact of extraordinary or unusual
items, events, or circumstances in order to avoid windfalls
or hardships.
(c) Termination of Employment. Subject to Section 10
and unless otherwise provided in the applicable Long Term
Performance Award Agreement, if a participant terminates employment
during a Performance Period because of death, Disability,
or Retirement, such participant shall be entitled to a
payment with respect to each outstanding Long Term Performance
Award at the end of the applicable Performance Period:
(i) based, to the extent relevant under the
terms of the award, upon the participant's performance
for the portion of such Performance Period ending on the date of
termination and the performance of the Company or any
applicable business unit for the entire Performance
Period, and
(ii) prorated for the portion of the Performance
Period during which the participant was employed by the
Company or a Subsidiary, all as determined by the Committee. The
Committee may provide for an earlier payment in
settlement of such award in such amount and under such
terms and conditions as the Committee deems appropriate. Subject
to Section 10 and except as otherwise provided in the
applicable Long Term Performance Award Agreement, if a
participant terminates employment during a Performance Period for
any other reason, then such participant shall not be
entitled to any payment with respect to the Long Term
Performance Awards subject to such Performance Period, unless the
committee shall otherwise determine.
(d) Form of Payment. The earned portion of a Long Term
Performance Award may be paid currently or on a deferred
basis with such interest or earnings equivalent as may be
determined by the Committee. Payment shall be made in the
form of cash or whole shares of Stock, including Restricted
Stock, or a combination thereof, either in a lump sum payment or in
annual installments, all as the Committee shall determine.
<PAGE>
Section 10. Change in Control Provisions
(a) Impact of Event. In the event of:
(i) a "Change in Control" as defined in Section
10(b), unless otherwise determined by the Committee or
the Board prior to the occurrence of such Change in Control, or
(ii) a "Potential Change in Control" as defined
in Section 10(c), but only if and to the extent so
determined by the Committee or the Board, the following
acceleration and valuation provisions shall apply:
(1) Any Stock Options and Stock Appreciation
Rights outstanding as of the date such Change in
Control or such Potential Change in Control is determined to have
occurred and not then exercisable and vested shall
become fully exercisable and vested; provided,
however, that, in the case of Stock Appreciation Rights held by an
optionee who is actually subject to Section 16(b)
of the Exchange Act, such Stock Appreciation Rights shall not
become exercisable and vested unless they shall have
been outstanding for at least six months at the
date such Change in Control is determined to have occurred.
(2) The restrictions and forfeiture provisions
applicable to any Restricted Stock shall lapse, and
such Restricted Stock shall become fully vested.
(3) The value of all outstanding Stock Options,
Stock Appreciation Rights, and Restricted Stock
shall, unless otherwise determined by the Committee at or after
grant, be cashed out on the basis of the "Change in
Control Price", as defined in Section 10(d), as of
the date such Change in Control or such Potential Change in Control
is determined to have occurred or such other date
as the Committee may determine prior to the Change in
Control.
(4) Any outstanding Long Term Performance Awards
shall, unless the Committee otherwise determines,
be vested and paid out based on the prorated target results for the
Performance Periods in question, unless the
Committee provides prior to the Change in Control
event for a different payment.
(b) Definition of "Change in Control". For purposes of
Section 10(a), a "Change in Control" means a change in
control of the Company of a nature that would be required, to be
reported in response to Item 1(a) of the Current Report
on Form 8-K, as in effect on the effective date of the
Plan, pursuant to Section 13 or 15(d) of the Exchange Act; provided
that, without limitation, such a "Change in Control"
shall be deemed to have occurred if:
(i) A third person, including a "group" as such
term is used in Section 13(d)(3) of the Exchange
Act, other than the trustee of a Company employee benefit plan,
becomes the beneficial owner, directly or
indirectly, of 20 percent or more of the combined voting power
of the Company's outstanding voting securities
ordinarily having the right to vote for the
election of directors of the Company;
(ii) During any period of 24 consecutive months
individuals who, at the beginning of such
consecutive 24-month period, constitute the Board of Directors of
the Company (the "Board" generally and as of the
effective date of the Plan the "Incumbent Board") cease for
any reason (other than retirement upon reaching normal
retirement age, disability, or death) to constitute
at least a majority of the Board; provided that any person becoming
a director subsequent to the effective date of the
Plan whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least
three-quarters of the directors comprising the
Incumbent Board (other than an election or nomination of
an individual whose initial assumption of office is in
connection with an actual or threatened election
contest relating to the election of the Directors of the Company,
as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be,
for purposes of this Agreement, considered as though such person
were a member of the Incumbent Board; or
(iii) The Company shall cease to be a publicly
owned corporation having its outstanding Stock
listed on the New York Stock Exchange or quoted in the NASDAQ
National Market System.
(c) Definition of "Potential Change in Control". For
purposes of Section 10(a), a "Potential Change in
Control" means the happening of any one of the following:
(i) The entering into an agreement by the
Company, the consummation of which would result in
a Change in Control of the Company as defined in Section 10(b); or
(ii) The acquisition of beneficial ownership,
directly or indirectly, by any entity, person, or
group (other than the trustee of a Company employee benefit plan)
of securities of the Company representing five
percent or more of the combined voting power of the Company's
outstanding voting securities and the adoption by the
Board of a resolution to the effect that a
Potential Change in Control of the Company has occurred for
purposes of the Plan.
(d) Change in Control Price. For purposes of this
Section 10, "Change in Control Price" means the highest
price per share paid in any transaction reported on the New York
Stock Exchange Composite Index or paid or offered in
any bona fide transaction related to an actual or potential
Change in Control of the Company at any time during the
preceding 60-day period as determined by the Committee,
except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options,
such price shall be based only on transactions reported
for the date on which the Committee decides to cash out such Stock
Options.
Section 11. Amendments and Termination
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would
impair the rights of an optionee under a Stock Option or a
recipient of a Stock Appreciation Right, Restricted Stock award, or
Long Term Performance Award therefore granted without the
optionee's or recipient's consent or which, without the approval of
the Company's stockholders, would:
(a) except as expressly Provided in the Plan, increase
the total number of shares reserved for the purpose of
the Plan;
(b) decrease the option price of any Stock Option to
less than the Fair Market Value on the date of grant;
(c) change the class of employees eligible to
participate in the Plan; or
(d) extend the maximum option periods under Section
6(b).
The Committee may amend the terms of any Stock Option or
other award theretofore granted, prospectively or
retroactively, but no such amendment shall impair the right of any
holder without the holder's consent. Subject to the above
provisions, the Board shall have authority to amend the
Plan to take into account changes in law and tax and accounting
rules, as well as other developments.
Section 12. Unfunded Status of Plan
It is presently intended that the Plan constitute an
"unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to
deliver Stock or make payments; provided, however, that, unless the
Committee otherwise determines, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the
Plan.
Section 13. General Provisions
(a) All certificates for shares of Stock or other
securities delivered under the Plan shall be subject to
such stock transfer orders and other restrictions as the committee
may deem advisable under the rules, regulations, and other
requirements of the Commission, any stock exchange upon
which the Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate
reference to such restrictions. The Committee may require
any optionee purchasing shares pursuant to a Stock Option
to represent to and agree with the Company in writing that the
optionee is acquiring the shares without a view to the
distribution thereof.
(b) Nothing contained in this Plan shall prevent the
Company or a Subsidiary from adopting other or additional
compensation arrangements for its employees.
(c) The adoption of the Plan shall not confer upon any
employee any right to continued employment nor shall it
interfere in any way with the right of the Company or a Subsidiary
to terminate the employment of any employee at any time.
(d) No later than the date on which the Company is
required to withhold taxes in respect of an award, the
participant shall pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, any
Federal, state, local, or other taxes of any kind required by
law to be withheld with respect to such award or any payment or
distribution made in connnection therewith. Unless
otherwise determined by the Committee, withholding obligations may
be settled with Stock, including Stock that is part of the
award that gives rise to the withholding requirement;
provided, however, that in the case of any optionee who is actually
subject to Section 16(b) of the Exchange Act, any such
settlement shall comply with the applicable requirements of Rule
16(b)-3. The obligations of the Company under the Plan
shall be conditional on such payment or arrangements, and
the Company and its Subsidiaries shall, to the extent permitted by
law, have the right to deduct any such taxes from any
payment otherwise due to the participant.
(e) The reinvestment of dividends in additional
Restricted Stock at the time of any dividend payment shall
only be permissible if sufficient shares of Stock are available
under Section 3 for such reinvestment (taking into account
then outstanding Stock Options and other Plan awards).
(f) The Committee shall establish such procedures as
it deems appropriate for a participant to designate a
beneficiary to whom any amounts payable with respect to outstanding
awards under the Plan in the event of the participant's
death are to be paid.
(g) The Plan and all awards made and actions taken
thereunder shall be governed by and construed in
accordance with the laws of the State of Connecticut.
Section 14. Effective Date of Plan; Shareholder Approval
The Plan shall be effective as of the date it is adopted by
the Board, subject however to the approval of the Plan by the
holders of at least a majority of the outstanding shares of Stock
of the Company present or represented and entitled to vote at a
meeting of shareholders of the Company. Awards may be made under
the Plan on and after its effective date; provided, however, that
any such awards shall be null and void if shareholder approval of
the Plan is not obtained within 12 months of the adoption of the
Plan by the Board.
Section 15. Term of Plan
No Stock Option, Stock Appreciation Right, Restricted Stock
award, or Long Term Performance Award shall be granted on or after
the tenth anniversary of the effective date of the Plan, but awards
granted prior to such tenth anniversary (including, without
limitation, Long Term Performance Awards for Performance Periods
commencing prior to such tenth anniversary) may extend beyond that
date.
Adopted: April 11, 1989
Amended: October 17, 1990
Amended: May 19, 1993
Amended: October 20, 1993
CROMPTON & KNOWLES CORPORATION EXHIBIT 10 (u)
1993 Stock Option Plan for Non - Employee Directors
1. Purpose
The purpose of this 1993 Stock Option Plan for Non - Employee
Directors (the "Plan") of Crompton & Knowles Corporation (the
"Company") is to attract and retain highly qualified non-employee
directors of the Company and to encourage non-employee directors to
own shares of the Company's Common Stock, $.10 par value ("Common
Stock").
2. Participation
All directors of the Company who are not employees of the
Company or any subsidiary of the Company shall be eligible to
participate in the Plan.
3. Administration
(a) Grants. Grants of stock options under the Plan shall be
automatic as provided in Section 6.
(b) Committee. A committee (the "Committee"), which shall be
the Committee on Executive Compensation of the Board or
such other committee composed of three or more directors
or other persons appointed for such purpose by the Board,
shall administer the Plan. If at any time no committee designated
to administer the Plan shall be in office, the functions
of the Committee shall be exercised by the Board.
(c) Rules; Committee Action. The Committee shall have the
authority to adopt, alter and repeal such administrative
rules, guidelines, and practices governing the Plan as it
shall from time to time deem advisable and to interpret the terms
and provisions of the Plan and any award issued under the
Plan (and any agreement relating thereto). The Committee
may act only by a majority of its members then in
office, except that the members thereof may authorize any
one or more of their number or any officer of the Company to
execute and deliver documents on behalf of the Committee.
4. Stock Available for Options
(a) Shares Available. Subject to adjustment under subsection
(b), options may be granted under the Plan in respect of
a maximum of 100,000 shares of Common Stock. Shares
subject to an option that expires or terminates
unexercised shall again be available for options hereunder to the
extent of such expiration or termination. Shares issued
under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) Adjustment. In the event of any stock dividend,
extraordinary cash dividend, creation of a class of
equity securities, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, exchange of
shares, issuance of warrants or activation of rights to
purchase Common Stock at a price substantially below fair
market value, or similar change affecting the Common
Stock, such adjustment shall be made in the maximum number and
kind of shares subject to the Plan, in the number and kind of
shares subject to outstanding options and subsequent
options grants, and in the purchase price of outstanding
options as the Board shall deem to be appropriate under the
circumstances to prevent substantial dilution or enlargement of
the rights granted to participants hereunder.
5. Nonstatutory Stock Options
All options granted under the Plan shall be nonstatutory
options not intended to qualify under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
6. Terms and Conditions of Options
Each option granted under the Plan shall be evidenced by a
written instrument in such form as the Committee may approve and
shall be subject to the following terms and conditions:
(a) Grant of Options. As used in the Plan, the term "Grant
Date" means the date of the first meeting of the Board in
each calendar year (or, in the case of a director first
elected or appointed to the Board after such first meeting, the
date of the meeting at which such director is first elected
or appointed). Each year, an option shall be granted
automatically to each eligible director on the Grant Date
to purchase that number of full shares of Common Stock
determined by dividing the amount of the annual retainer then
payable to directors for service on the Board by the Fair
Market Value (as hereinafter defined) of the Common Stock
on the Grant Date.
(b) Purchase Price. The purchase price for Common Stock
subject to an option shall be 100% of the Fair Market
Value of the Common Stock on the Grant Date.
(c) Fair Market Value. As used in the Plan, the term "Fair
Market Value" means the mean, as of any given date,
between the highest and lowest reported sales prices of
the Common Stock on the New York Stock Exchange Composite
Index on such date (or, if there is no reported sale on such date,
on the last preceding date on which any reported sale
occurred).
(d) Expiration Date of Options. The expiration date of each
option shall be fixed by the Committee, but no option
granted under the Plan shall be exercisable more than ten
years after the Grant Date.
(e) Exercisability of Options. Options shall be exercisable
in whole or in part with respect to 50% of the shares
covered thereby on or after the first anniversary of the
Grant Date and as to the remaining 50% of such shares on
or after the second anniversary of the Grant Date.
(f) Termination of Service. In the event service on the
Board by the holder of any option terminates for any
reason other than disability, death, or Change in Control
(as hereinafter defined), the then outstanding options of such
holder may thereafter be exercised, to the extent
exercisable at the time of such termination, for a period
of one year from the date of such termination but in no
event after the stated expiration date of each option.
(g) Disability or Death; Change in Control. In the event
service on the Board by the holder of any option
terminates by reason of disability, death, or Change in
Control, the then outstanding options of such holder will become
immediately exercisable, to the extent not otherwise
exercisable, and will expire one year after such
termination. Such options may be exercised during such
one-year period regardless of their stated expiration dates. The
rights of the option holder may be exercised by the
holder's guardian or legal representative in the case of
disability and by the beneficiary designated by the
holder in writing delivered to the Company or, if none has been
designated, the holder's estate in the case of death.
(h) Exercise and Payment. Options may be exercised only by
written notice to the Secretary of the Company
accompanied by payment of the full purchase price for the
shares as to which they are exercised. The purchase price may be
paid in cash, in shares of Common Stock already owned for
at least six months by the optionee (or other person
entitled to exercise the option), or partly in cash and
partly in such shares of Common Stock. The value of shares
delivered in payment of the purchase price shall be their
Fair Market Value, as determined above, as of the date of
exercise. Upon receipt of such notice and payment, the
Company shall promptly issue and deliver to the optionee (or other
person entitled to exercise the option) a certificate or
certificates for the number of shares as to which the
exercise is made.
(i) Change in Control. As used herein, a "Change in Control"
means a change in control of the Company of a nature that
would be required to be reported in response to Item 1(a)
of the Current Report on Form 8-K, as in effect on the
effective date of the Plan, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act");
provided that, without limitation, such a "Change in
Control" shall be deemed to have occurred if:
(i) A third person, including a "group" as such term
is used in Section 13(d)(3) of the Exchange Act,
other than the trustee of a Company employee
benefit plan, becomes the beneficial owner, directly or
indirectly, of 20 percent or more of the combined voting
power of the Company's outstanding voting
securities ordinarily having the right to vote for
the election of directors of the Company;
(ii) During any period of 24 consecutive months
individuals who, at the beginning of such
consecutive 24-month period, constitute the Board
of Directors of the Company (the "Board" generally and as of the
effective date of the Plan the "Incumbent Board")
cease for any reason (other than retirement upon
reaching normal retirement age, disability, or
death) to constitute at least a majority of the Board;
provided that any person becoming a director subsequent to the
effective date of the Plan whose election, or
nomination for election by the Company's
shareholders, was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board
(other than an election or nomination of an individual
whose initial assumption of office is in
connection with an actual or threatened election
contest relating to the election of the Directors of the
Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be,
for purposes of this Agreement, considered as
though such person were a member of the Incumbent
Board; or
(iii) The Company shall cease to be a publicly owned
corporation having its outstanding stock listed on
the New York Stock Exchange or quoted in the
NASDAQ National Market System.
7. Options not Transferable
Options granted under the Plan shall not be transferable by
the holder other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income
Security Act ("ERISA") or the rules thereunder.
8. Limitation of Rights
Neither the Plan nor the granting of any option hereunder
shall constitute an agreement or understanding that the Company
will retain a director for any period of time or at any particular
rate of compensation. The holder of an option shall have no rights
as a shareholder with respect to shares as to which the option has
not been exercised and payment made hereunder.
9. Purchase for Investment
Unless the options and shares of Common Stock covered by the
Plan have been registered under the Securities Act of 1933, as
amended, or the Company has determined that such registration is
unnecessary, each holder exercising an option may be required by
the Company to represent in writing that such holder is acquiring
the shares subject to the option for his own account for investment
and not with a view to, or for sale in connection with, the
distribution of any part thereof.
10. Compliance with Regulations
It is the intention of the Company that the Plan comply in all
respects with Rule 16b-3 promulgated under Section 16(b) of the
Exchange Act and that eligible directors remain disinterested
persons for purposes of administering other employee benefit plans
of the Company and having such other plans be exempt from Section
16(b) of the Exchange Act. Therefore, if any Plan provision or
Committee rule is later found not to be in compliance with Rule
16b-3 or if any Plan provision or Committee rule would disqualify
eligible directors from remaining disinterested persons, that
provision or rule shall be deemed null and void, and in all events
the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3.
11. Effective Date of the Plan
The Plan shall be effective as of the date it is adopted by
the Board. Options granted under the Plan may not be exercised
prior to the time the Plan shall have been approved by the holders
of a majority of the outstanding Common Stock present or
represented and entitled to vote at a meeting of shareholders of
the Company. If such approval of the Plan by the shareholders is
not obtained within one year of the adoption of the Plan by the
Board, the Plan and any options granted pursuant to the Plan shall
be null and void.
12. Amendment of the Plan
The Board may amend, suspend, or terminate the Plan or any
portion thereof at any time, provided that no amendment affecting
the amount of Common Stock subject to options granted under the
Plan, the exercise price of options, or the timing of grants may be
made more than once every six months, other than to comport with
changes in the Code, ERISA, or the rules thereunder.
13. Governing Law
The Plan shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
<TABLE>
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In thousands of dollars except per share data)
PRIMARY FULLY DILUTED
<CAPTION> 1993 1992 1991 1993 1992 1991
Earnings
Earnings before cumulative
effect of accounting
changes & extraordinary
loss
<C> <C> <C> <C> <C> <C>
<S> $ 51,958 $ 43,265 $ 35,941 $ 51,958 $ 43,265 $ 35,941
Cumulative effect of
accounting changes &
extraordinary l - (8,800) - - (8,800) -
Net earnings $ 51,958 $ 34,465 $ 35,941 $ 51,958 $ 34,465 $ 35,941
Shares
Weighted average shares
outstanding 51,287 48,571 47,635 51,287 48,571 47,635
Common stock equivalents 649 1,149 1,339 889 1,396 1,682
Average shares outstanding 51,936 49,720 48,974 52,176 49,967 49,317
Per share
Earnings before cumulative
effect of accounting
changes & extraordinary
loss $ 1.00 $ 0.87 $ 0.73 $ 1.00 $ 0.87 $ 0.73
Cumulative effect of
accounting
changes & extraordinary l - (0.18) - - (0.18) -
Net earnings $ 1.00 $ 0.69 $ 0.73 $ 1.00 $ 0.69 $ 0.73
</TABLE>
CROMPTON & KNOWLES CORPORATION EXHIBIT 13
1993 Annual Report
Performance
Service
Technology
Crompton & Knowles is a worldwide producer and marketer of
specialty chemicals and equipment. The company's 51 million
shares of common stock outstanding are traded on the New York
Stock Exchange under the symbol CNK. Dividends on the stock have
been paid for 244 consecutive quarters and have increased in each
of the last 17 years. Crompton & Knowles has gained leadership
positions in its chosen markets by providing quality products,
technical service and performance know-how to solve problems and
add value to customers' products. The company's businesses are
grouped into two segments:
SPECIALTY CHEMICALS
Crompton & Knowles is a major producer and marketer of dyes
worldwide and a major producer and marketer of specialty food and
pharmaceutical ingredients in North America.
SPECIALTY PROCESS EQUIPMENT AND CONTROLS
The company is a recognized world leader in extrusion systems,
industrial blow molding equipment and related electronic controls
for the plastics industry.
(pie charts)
SALES BY BUSINESS SEGMENT
Specialty Process Equipment and Controls - $151.0
Specialty Chemicals - $407.3
OPERATING PROFIT BY BUSINESS SEGMENT
Specialty Process Equipment and Controls - $26.0
Specialty Chemicals - $68.0
Crompton & Knowles is a member of the Chemical Manufacturers
Association and a signatory of the Association's Responsible
Care@ Program. The company is committed to a continuous good
faith effort to improve performance in health, safety and
environmental quality.
FINANCIAL HIGHLIGHTS
(In thousands of dollars, except per share data) 1993
1992 % Change
Net sales........................$558,348 $517,718
8%
Earnings from operations before
income taxes.....................$ 82,473 $ 68,337
21
Income taxes..................... 30,515 25,072
22
Earnings from operations......... 51,958 43,265
20
Cumulative effect of accounting
changes and extraordinary loss... - (8,800)
- -
Net earnings.....................$ 51,958 $ 34,465
51
Per common share:
Earnings from operations.....$ 1.00 $ .87
15
Net earnings.................$ 1.00 $ .69
45
Dividends....................$ .38 $ .31
25
Book value...................$ 4.68 $ 4.14
13
Return on average common equity
(from operations)................ 23.1% 27.1%
Common stock trading range:
High......................... 27 1/4 23 7/8
Low.......................... 17 5/8 16
Average shares outstanding
(in thousands)................... 52,176 49,967
Shareholders of record........... 4,000 3,100
SALES
Continuing Operations
(In millions of dollars)
(bar graph referencing ELEVEN YEAR SELECTED FINANCIAL DATA)
EARNINGS PER SHARE
Continuing Operations
(bar graph referencing ELEVEN YEAR SELECTED FINANCIAL DATA)
RETURN ON AVERAGE COMMON EQUITY
Continuing Operations
(bar graph referencing ELEVEN YEAR SELECTED FINANCIAL DATA)
Fellow Shareholders:
Crompton & Knowles completed its 11th consecutive year of record
sales and operating earnings in 1993. Nevertheless, it was not an
easy year. In fact, it was very difficult in many of our markets
as domestic growth remained weak and economic recession continued
its grip on many parts of the world. Yet, through the efforts of
all of our employees, we were able to overcome these hurdles and
demonstrate the value of market focus as a basis for delivering
results for shareholders.
At Crompton & Knowles, market focus is a commitment to understand
and satisfy our customers' changing needs with quality products
and technical service in order for them to be successful. This
focus guides the activities of everyone in our organization, from
the development of new products to the implementation of specific
sales programs in the field. The result has been consistent
growth.
Sales in 1993 reached $558.3 million, an increase of eight
percent from the prior year. Net earnings were $52.0 million, or
$1.00 per share, compared to earnings from operations of $43.3
million, or 87 cents per share, in 1992. Net earnings in 1992
were $34.5 million, or 69 cents per share, reflecting special
charges of $8.8 million, or 18 cents per share, relating to
changes in accounting standards and prepayment penalties incurred
for the early retirement of certain long-term debt.
It is noteworthy that these gains were accomplished primarily
through internal growth and that both segments of the company's
business - specialty chemicals and specialty process equipment
and controls - contributed to these results.
Our specialty chemicals segment - comprised of worldwide dyes and
specialty ingredients for the North American food and
pharmaceutical industries - had record sales of $407.3 million,
an increase of three percent. The segment's operating profit rose
seven percent to $68.0 million.
In our largest product line - domestic dyes - we met the
challenge to deliver gains in the face of lower industry-wide
demand. This was accomplished with specific and targeted efforts
directed at key markets and customers. While certain apparel
sectors declined, we increased sales to home furnishings and
industrial applications. We strengthened our position in the
hosiery market and we participated in the strong demand for
automotive textile dyes. Several new dyes introductions for the
carpet, paper and leather industries enabled us to improve our
position in these sectors.
The lower demand for dyes in Europe continued into 1993 but
showed signs of improvement as the year ended. Results from our
operations in Europe remained flat compared to the prior year's
record results.
Productivity programs and cost containment programs also helped
assure improved operating profits in all of our dyes business.
Our specialty ingredients business, serving the food and
pharmaceutical industries, improved over the prior year as sales
increased three percent. New product developments in 1993 - both
those commercialized and those introduced for testing by major
customers during the year - increased and set the stage for more
significant improvements for this business in the future.
An outstanding year was posted by our specialty process equipment
and controls segment as sales surged 23 percent to $151.0 million
and operating profit rose 30 percent to $26.0 million. Business
volume in North America was strong in key sectors. International
sales also increased, accounting for 27 percent of the segment's
sales. To meet increased demand in this business, manufacturing
capacity was increased late in the year.
We're proud of the results we achieved in 1993. We increased
sales and earnings to record levels. We realized a return on
average common equity of 23.1 percent as average equity increased
41 percent. For the 17th consecutive year we increased the
dividend paid to shareholders and in 1993 the increase was 25
percent to 40 cents per share. This was accomplished without the
cooperation of many of our market sectors. Yet, we are neither
satisfied nor content with these results.
As we've stated repeatedly in our reports to shareholders, we
recognize that our job is to continue to produce better results
every year. We take this assignment very seriously and want to
reiterate our commitment to achieving increased shareholder
value. Our success will continue to be dependent on our ability
to stay market focused - to provide customers with the products
and service they must have to be successful. We will continue to
work to understand our customers' businesses as well as they do,
and to work with them to solve their problems. We are confident
this philosophy will continue to produce positive results.
We fully expect 1994 to be another excellent year for Crompton &
Knowles. We thank you for your continuing support and look
forward to reporting to you on our progress.
Respectfully yours,
Vincent A. Calarco
Chairman, President, and
Chief Executive Officer
March 2, 1994
HIGHLIGHTS
Record sales, up 8% to $558.3 million.
Record earnings from operations, rising 20% to $52.0 million.
Return on average common equity was 23.1%.
Dividend increased 17th consecutive year; up 25% to 40 cents
annually.
Stockholders' equity reached record $240.0 million.
Sales per employee rose 9th consecutive year, to $240 thousand.
SPECIALTY CHEMICALS
Improved results in domestic dyes and specialty ingredients
operations brought sales and operating profit to record levels.
Segment sales reached a record $407.3 million, an increase of
three percent from the prior year's sales of $395.2 million.
Operating profit was $68.0 million, seven percent higher than
1992 operating profit of $63.4 million.
Despite weak industry-wide demand in the domestic apparel dyes
industry, the dyes operations posted record results with gains in
virtually all major market sectors. This performance was achieved
as a result of a careful focus on key industry sectors while
maintaining flexible production capabilities at the company's
five domestic locations.
In the apparel market, sales of dyes for nylon, cotton and
acrylics improved. The company is a leading producer of dyes for
each of these fibers. Upscale fashion-driven apparel, dependent
on well-executed styling features and quick delivery to retail
outlets, continued to be an important domestic market less
affected by low-priced imported fabrics or garments. A growing
position in dyes for hosiery also benefitted the company.
In addition, the introduction of specialized new products for the
dyeing of paper, leather and plastic resulted in growth for the
company in each of these markets.
The strongest domestic dyes market throughout 1993 was the carpet
industry, as housing construction increased and redecorating of
existing homes continued. The introduction of several new
products strengthened the company's position in this market.
The company's foreign dyes operations were negatively affected by
poor economic conditions in Europe. Yet, with the benefits of the
dyes acquisition in May 1992, operating results of the foreign
dyes operations were virtually unchanged from the record results
of 1992.
In keeping with its commitment to produce environmentally
friendly products under the Responsible Care Program of the
Chemical Manufacturers Association, the company in 1993 continued
its program of introducing new dyes with improved fixation rates,
reduced salt content, and higher exhaustion levels. These new
products will benefit Crompton & Knowles, its customers and the
environment by delivering better dyeing results while using less
resources and producing less waste.
The highly specialized nature of many of the company's dyes
products, growing customer dependence on prompt and knowledgeable
technical service and increasingly sophisticated production and
environmental regulations should permit Crompton & Knowles to
continue to grow and strengthen its dyes business as it stays
aligned with the less import-sensitive segments of the textile
industry.
HIGHLIGHTS
Sales increased 3 percent to record $407.3 million
Operating profit increased 7 percent to record $68.0 million
Domestic dyes business overcomes industry weakness
New dyes strengthen positions at key customers
Market share gains in specialized dyes segments
(photo captions)
Nylon apparel producers depend on Crompton & Knowles as a leading
provider of quality dyes and technical support to the industry.
Brightly-colored activewear maintains its colorfastness due to
specialized
dyes manufactured by Crompton & Knowles.
Home furnishings, including carpeting, upholstery fabrics and
draperies, are a key market for Crompton & Knowles' dyes.
SPECIALTY CHEMICALS (continued)
The specialty ingredients operations of Crompton & Knowles
improved sales by three percent in 1993 to $91.9 million. The
business benefitted from internal developments as well as the
greater dependence of major food and pharmaceutical companies on
suppliers of systems solutions for their new products.
In the food ingredients sector, the company's broad technological
base, including innovative and functional flavors, seasonings,
colors and sweeteners, has enabled it to offer unique
problem-solving capabilities to its customers.
Convenience foods - including entrees, processed meats, side
dishes, soups, sauces, gravies and salad dressings - have been an
area of strength for the company as leading food companies have
introduced products meeting consumer demands for tasty and
attractive frozen, microwaveable, shelf-stable packaged products.
The demand for "clean labels" with minimal sodium and other
additives such as MSG and hydrolyzed vegetable proteins have
played to Crompton & Knowles' strength in this area. The
company's proprietary sauteed flavor systems have been popular
among producers of packaged convenience foods, as have dairy
flavor systems which remain stable through freeze/thaw and
microwave cycles in food preparation.
Food service companies seeking products which appeal to
health-conscious consumers at restaurants, cafeterias and
fast-food chains, have also turned to Crompton & Knowles for
unique flavor solutions which improve their offerings and keep
customers returning.
Snack ingredients systems combining seasonings, flavors and
colors is an area of specialization for the company. The most
important consumer products in this market have been potato,
corn, tortilla and multigrain chips. In the beverage market,
growth in flavored waters, clear sodas, sports drinks and fruit-
and tea-flavored drinks has presented the company's flavor
technologists with increasing product development opportunities.
Sweetener systems for the bakery, cereal and confectionery
industries experienced growth for the company in 1993. As one of
North America's leading suppliers of molasses and malt products,
Crompton & Knowles has a longstanding reputation for product
quality and service which has reinforced flavor systems marketing
and sales efforts.
With a marketing effort structured to focus technical development
efforts on evolving consumer and food industry trends, Crompton &
Knowles is well positioned to continue growth in sales in the
specialty food ingredients industry.
Sales in the company's pharmaceutical ingredients business
reached record levels with growth in polymer coatings, colors,
excipients, binders and flavors for vitamins, prescription drugs
and over-the-counter pharmaceuticals. The proven record of the
pharmaceutical industry's ability to improve the health of
patients while containing medical costs should present
opportunities for ongoing growth in this business.
HIGHLIGHTS
Sales of specialty ingredients increased 3% as product mix
continued to improve
Development pipeline continued to increase and improve in quality
"Ingredient Systems" marketing strategy gains acceptance in food
industry
(photo captions)
Leading North American producers of packaged convenience foods
turn to Crompton & Knowles for proprietary sauteed flavor
systems.
Prescription drugs and over-the-counter pharmaceuticals
incorporate polymer coatings, colors, excipients and flavors made
by Crompton & Knowles.
SPECIALTY PROCESS EQUIPMENT AND CONTROLS
The company's specialty process equipment and controls segment
had record sales and operating profits in 1993. Sales increased
23 percent to $151.0 million compared with $122.5 million in the
prior year. Operating profit was $26.0 million, or 30 percent
higher than in 1992.
Contributing to the segment's record performance were gains in
North American and international markets. Domestically, sales
gains were achieved in all major sectors of the business, due in
part to the resurgent automotive industry and growing demand for
non-disposable plastic products used by industry and consumers.
Systems for the production of wire and cable insulation and
jacketing and medical systems also increased.
To meet this increased demand during the year and to respond to
customer
requirements for shorter delivery schedules, the company expanded
production facilities in Pawcatuck, Connecticut.
International business remained strong, reaching $41 million or
27 percent of sales, increasing from the prior year's record
levels as sales to the Far East, especially to the Peoples
Republic of China, continued to increase. The company's growth in
the Far East should be enhanced in future years as a result of a
new technical sales and service center opened in Hong Kong.
New products introduced during 1993 included specialized
equipment for the rubber industry, used in tire production; a
parallel twin screw extruder for fast and efficient production of
siding and pipe made of PVC; unique telephone wire take-up
equipment designed to satisfy international telecommunications
demand; and specialized dies for blown film production facilities
making coextruded film with as many as eight layers of plastic.
1993 ended with an order backlog of $38 million.
Highlights
Sales surged 23 percent to record $151.0 million on strong
domestic and
international demand
Operating profit gained 30 percent to record $26.0 million
Profile extrusion system sales rose on automobile industry
strength
Medical products extrusion systems continue strong growth
Order backlog at $38 million at year-end
Opened Hong Kong sales and service center
(photo captions)
Plastics producers around the world produce single layer and
multi-layer blown film for packaging using plastics extrusion
systems from Crompton & Knowles.
Specialized elastomer extrusion systems from Crompton & Knowles
assure consistent quality and performance of dual durometer
weatherstripping in automobiles.
Crompton & Knowles is a leading supplier of extrusion equipment
for the production of precise multilumen tubing and IV bags for
medical applications.
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
Liquidity and Capital Resources
The December 25, 1993 working capital balance of $125.O million
increased
$20.2 million from the December 26, 1992 balance of $104.8
million as current assets rose $13.O million and current
liabilities declined $7.2 million. The current ratio increased to
2.3 from 2.O at the end of 1992. Days sales in receivables
increased to 52 days in 1993 from 46 days in 1992 primarily as a
result of increased export sales. Inventory turnover of 2.9
improved from 2.7 in 1992 primarily as a result of inventory
reduction programs.
Cash flow from operating activities of $52.4 million increased 8%
from $48.5 million in 1992 and was used primarily to finance
capital expenditures, reduce long-term indebtedness, repurchase
280,000 shares of the Company's common stock and pay cash
dividends. Dividends paid in 1993 of $19.5 million represent a
payout ratio of 38% of earnings. The Company's debt-to-capital
ratio was reduced to 7% from 12% at year-end 1992.
Capital expenditures increased to $14.3 million from $12.8
million in 1992.
Capital expenditures are expected to approximate $20 million in
1994 primarily for expansion and improvement of operating
facilities in the United States and Europe. The Company's
long-term liquidity needs including such items as capital
expenditures and dividends are expected to be financed through
operations. The Company has available numerous uncommitted
short-term lines of credit and a revolving credit agreement
providing for borrowings up to $70 million through September 28,
1996. At year-end, there were $5.1 million of short-term
borrowings outstanding and $10.0 million outstanding under the
revolving credit agreement.
Inflation
During the last three years, inflation has not been a significant
factor in the net earnings of the Company. The LIFO method of
accounting is used for a major portion of the Company's
inventories. Under this method, the cost of products sold
approximates current costs and thus reduces possible distortion
of reported earnings due to rising costs. The Company continually
emphasizes cost controls and efficient management of resources to
mitigate the influence of inflation.
International Operations
The stronger U.S. dollar exchange rate versus primarily the
Belgian Franc and the French Franc accounted for the reduction of
$4.4 million in the accumulated translation adjustment account
since year-end 1992. Changes in the balance of this account are
primarily a function of fluctuations in exchange rates and do not
necessarily reflect either enhancement or impairment of the net
asset values or the earnings potential of the Company's foreign
operations.
The Company operates manufacturing facilities in Europe which
serve primarily the European market. Exchange rate disruptions
between the United States and European currencies, and among
European currencies, are not expected to have a material effect
on year-to-year comparisons of the Company's earnings.
Research and Development
The Company employs about 240 engineers, draftsmen, chemists, and
technicians responsible for developing new and improved chemical
products and process equipment systems for the industries served
by the Company. Often, new products are developed in response to
specific customer needs. The Company's process of developing and
commercializing new products and product improvements is ongoing
and involves many products, no one of which is large enough to
significantly impact the Company's results of operations from
year to year. Research and development expenditures totalled
$11.2 million, $10.1 million and $9.7 million in the fiscal years
1993, 1992 and 1991, respectively.
Environmental Matters
The Company's manufacturing facilities are subject to various
federal, state and local requirements with respect to the
discharge of materials into the environment or otherwise relating
to the protection of the environment. Although precise amounts
are difficult to define, the Company spent approximately $13.0
million in 1993 to comply with those requirements, including
approximately $4.1 million in capital expenditures.
The Company has been designated, along with others, as a
potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
or comparable state statutes, at two waste disposal sites; and
two inactive subsidiaries have been designated, along with
others, as potentially responsible parties at a total of four
other sites.
While the cost of compliance with existing environmental
requirements is expected to increase, based on the facts
currently known to the Company, management expects that those
costs, including the cost to the Company of remedial actions at
the waste disposal sites where it has been named a potentially
responsible party, will not have a material effect on the
Company's liquidity and financial condition and that the cost to
the Company of any remedial actions will not be material to the
results of the Company's operations in any given year.
OPERATING RESULTS - 1993 AS COMPARED TO 1992
Overview
Consolidated net sales of $558.3 million increased 8% from $517.7
million in 1992. Net earnings increased 20% to $52.0 million
compared with 1992 operating earnings of $43.3 million. Operating
earnings in 1992 excluded charges relating to the adoption of two
new accounting standards ($5.8 million) and the penalty for early
extinguishment of debt ($3.0 million). Earnings per common share
of $1.00 increased 15% compared with operating earnings per share
of $.87 in 1992. Average shares outstanding increased 2.2 million
to 52.2 million primarily as a result of the stock offering in
December, 1992.
The gross margin percentage increased to 31.8% from 31.0% in 1992
primarily due to lower raw material costs and improved product
mix in the specialty chemicals segment. Operating profit of $94.0
million increased $10.6 million, or 13%, from $83.4 million in
1992 due to gains in both business segments.
Specialty Chemicals
The Company's specialty chemicals segment reported a sales
increase of $12.1 million, or 3%, to $407.3 million from $395.2
million in 1992. Approximately 3% was attributable to incremental
sales from the pre-metallized dyes acquisition in May, 1992, 2%
to unit volume growth and minus 2% to foreign currency
translation. The proportion of sales outside the United States
decreased slightly to 25% from 26% in 1992.
Domestic dyes sales improved 5% reflecting higher unit volume in
certain key markets and new product introductions. International
dyes sales approximated the level in 1992 as incremental sales
from the pre-metallized dyes acquisition were offset by foreign
currency translation and the recessionary environment in Europe.
Sales of specialty ingredients increased 3%, reflecting increased
unit volume and improved product mix.
Operating profit increased $4.7 million, or 7%, to $68.0 million
from $63.4 million in 1992. Approximately 2% was attributable to
the pre-metallized dyes acquisition with the balance of 5%
attributable primarily to unit volume growth, lower raw materials
costs and improved product mix. The proportion of operating
profit outside the United States was 21% versus 23% in 1992.
Specialty Process Equipment and Controls
Sales of $151.0 million reported by the Company's specialty
process equipment and controls segment rose $28.5 million, or
23%, from $122.5 million in 1992. The sales increase was
attributable primarily to higher unit volume (21%) and pricing in
the second half of the year (2%). Domestic sales increased 19%
over 1992 while exports, particularly to the Far East, increased
37%. Export sales accounted for 27% of total segment sales versus
24% in 1992. Operating profit increased $6.0 million, or 30%, to
$26.0 million from $20.0 million in 1992, primarily as a result
of higher unit volume and improved pricing. The equipment order
backlog totalled $38 million at the end of 1993 compared to $34
million at the end of 1992.
Other
Selling, general and administrative expenses increased 9%
primarily due to the pre-metallized dyes acquisition and the
increased level of business. Depreciation and amortization
increased 4% over 1992 primarily as a result of a higher fixed
capital base including the pre-metallized dyes acquisition.
Interest expense of $1.1 million was 84% lower than 1992
primarily as a result of the long-term debt repayment in
December, 1992. Other income of $1.2 million was $1.4 million
below 1992 primarily due to lower foreign exchange gains and
lower interest income. The Company's effective tax rate of 37%
was up slightly from 36.7% in 1992 reflecting primarily the
higher U.S. tax rate in 1993.
OPERATING RESULTS - 1992 AS COMPARED TO 1991
Overview
Consolidated net sales of $517.7 million represent a 15% increase
from $450.2 million in 1991. Earnings from operations of $43.3
million increased 20% from $35.9 million in 1991. Net earnings
amounted to $34.5 million reflecting charges of $8.8 million
relating to the adoption of two new accounting standards ($5.8
million) and the penalty for early extinguishment of debt ($3.0
million). Earnings per share from operations of $.87 increased
19% from $.73 in 1991.
The gross margin percentage decreased to 31.0% from 31.9% in 1991
primarily as a result of the pre-metallized dyes acquisition, and
a lower margin product mix and competitive pricing in the
specialty process equipment and controls segment. Operating
profit of $83.4 million increased $11.9 million, or 17%, from
$71.5 million in 1991 due to gains in the specialty chemicals
segment.
Specialty Chemicals
The Company's specialty chemicals segment reported a sales
increase of $54.3 million, or 16%, to $395.2 million from $340.9
million in 1991. Approximately 6% was attributable to the
pre-metallized dyes acquisition, approximately 1% to foreign
currency translation and the balance of 9% primarily to unit
volume growth. The proportion of sales outside the United States
increased to 26% from 21% in 1991 primarily as a result of the
pre-metallized dyes acquisition.
Domestic dyes sales improved primarily due to stronger demand for
apparel dyes as well as improved broadloom carpet business. Sales
of the Company's international operations improved significantly
primarily due to the inclusion of the pre-metallized dyes
acquisition. Sales of specialty ingredients increased as a result
of increased demand for food flavors and additives for the
pharmaceutical industry.
Operating profit increased $11.9 million, or 23%, to $63.4
million from $51.5 million in 1991. Approximately 4% was
attributable to the pre-metallized dyes acquisition with the
balance of 19% attributable primarily to unit volume growth. The
proportion of operating profit outside the United States was 23%
in 1992, unchanged from 1991.
Specialty Process Equipment and Controls
The Company's specialty process equipment and controls segment
reported a
sales increase of $13.2 million, or 12%, to $122.5 million from
$109.3 million in 1991. All of the sales increase was
attributable to higher unit volume as demand for wire and cable
extrusion systems strengthened, especially in the export market,
and sales gains were reported in the plastic sheet and profile
extrusion markets. Export sales accounted for 24% of total
segment sales and were equal to the 1991 level. Operating profit
of $20.0 million was unchanged from 1991 as a lower-margin
product mix and competitive pricing offset volume gains. The
equipment order backlog of $34 million at the end of 1992
increased over the prior year-end level of $31 million.
Other
Selling, general and administrative expenses increased 6%
primarily due to the pre-metallized dyes acquisition and the
impact of inflation and foreign translation. Depreciation and
amortization increased 16% over 1991 due primarily to a higher
fixed capital base and the pre-metallized dyes acquisition.
Interest expense decreased 6% versus 1991 due primarily to lower
interest rates on short-term borrowings. Other income increased
by $281 thousand (less than 1% of pre-tax earnings) versus 1991.
The Company's effective tax rate of 36.7% was up slightly from
the prior year level of 36.5%.
FINANCIAL CONTENTS
Consolidated Financial Statements...........................14
Notes To Consolidated Financial Statements..................18
Responsibility For Financial Statements.....................25
Independent Auditors' Report................................25
Eleven Year Selected Financial Data.........................26
Corporate Officers And Operating Management.................28
Corporate Data...............................Inside Back Cover
CONSOLIDATED STATEMENTS OF EARNINGS
Fiscal years ended December 25, 1993, December 26, 1992, and
December 28, 1991
(In thousands of dollars, except per share data)
1993 1992 1991
SALES
Net sales...............................$558,348 $517,718
$450,228
COSTS AND EXPENSES
Cost of products sold................... 380,941 357,089
306,598
Selling, general and administrative..... 82,970 76,251
71,880
Depreciation and amortization........... 12,076 11,635
10,028
Interest................................ 1,093 6,984
7,419
Other income............................ (1,205) (2,578)
(2,297)
Total costs and expenses............... 475,875 449,381
393,628
EARNINGS
Earnings before income taxes, cumulative
effect of accounting changes and
extraordinary loss..................... 82,473 68,337
56,600
Income taxes............................ 30,515 25,072
20,659
Earnings before cumulative effect of
accounting changes and extraordinary
loss................................... 51,958 43,265
35,941
Cumulative effect of accounting changes. - (5,800)
-
Extraordinary loss on early
extinguishment of debt................. - (3,000)
-
Net earnings............................$ 51,958 $34,465
$35,941
EARNINGS PER COMMON SHARE
Earnings before cumulative effect of
accounting changes and extraordinary
loss...................................$ 1.00 $ .87
$ .73
Cumulative effect of accounting changes. - (.12)
-
Extraordinary loss on early
extinguishment of debt................. - (.06)
-
Net earnings............................$ 1.00 $ .69
$ .73
See accompanying notes to consolidated financial statements
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 25, 1993 and December 26, 1992
(In thousands of dollars, except per share data)
1993 1992
ASSETS
CURRENT ASSETS
Cash.............................................$ 9,284 $
2,441
Accounts receivable.............................. 84,482
74,759
Inventories...................................... 113,932
115,688
Other current assets............................. 12,698
14,495
Total current assets........................... 220,396
207,383
NON-CURRENT ASSETS
Property, plant and equipment.................... 99,925
98,827
Cost in excess of acquired net assets............ 33,275
34,629
Other assets..................................... 9,650
9,876
$363,246
$350,715
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable....................................$ 5,100 $
5,421
Accounts payable................................. 44,905
46,465
Accrued expenses................................. 25,574
33,296
Income taxes payable............................. 12,935
8,955
Other current liabilities........................ 6,925
8,456
Total current liabilities...................... 95,439
102,593
NON-CURRENT LIABILITIES
Long-term debt................................... 14,000
24,000
Accrued postretirement liability................. 9,084
8,774
Deferred income taxes............................ 4,727
3,896
Total non-current liabilities.................. 27,811
36,670
STOCKHOLDERS' EQUITY
Common stock, $.10 par value - issued
53,361,072 shares.............................. 5,336
5,336
Additional paid-in capital....................... 61,783
59,644
Retained earnings................................ 191,230
158,754
Accumulated translation adjustment............... (557)
3,803
Treasury stock at cost........................... (11,278)
(7,956)
Deferred compensation............................ (6,518)
(8,129)
Total stockholders' equity..................... 239,996
211,452
$363,246
$350,715
See accompanying notes to consolidated financial statements
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal years ended December 25, 1993, December 26, 1992 and
December 28, 1991
Increase (decrease) to cash (in thousands of dollars)
1993 1992 1991
CASH FLOWS FROM OPERATING ACTIVITIES
Earnings from operations......................$ 51,958 $ 43,265
$ 35,941
Adjustments to reconcile earnings from
operations to net cash provided by operations:
Depreciation and amortization................. 12,076 11,635
10,028
Deferred compensation......................... 1,611 1,850
740
Deferred income taxes......................... 340 1,280
(1,068)
Cumulative effect of accounting changes and
extraordinary loss........................... _ (8,800)
_
Changes in assets and liabilities:
Accounts receivable.......................... (11,798) (16,943)
(7,021)
Inventories.................................. (253) 5,939
(11,590)
Other current assets......................... 722 (5,833)
408
Other assets................................. 2 (373)
1,116
Accounts payable and accrued expenses........ (4,937) 4,830
8,494
Income taxes payable......................... 3,918 279
4,527
Other current liabilities.................... (1,435) 2,792
(2,775)
Accrued postretirement liability............. 310 8,774
_
Other........................................ (109) (197)
233
Net cash provided by operations.............. 52,405 48,498
39,033
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions ................................. _ (21,817)
(5,435)
Capital expenditures.......................... (14,299) (12,835)
(11,434)
Other investing activities.................... 1,972 (626)
(727)
Net cash used by investing activities........ (12,327) (35,278)
(17,596)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock............ _ 45,743
_
Proceeds from long-term borrowings............ _ _
10,000
Payments of long-term debt.................... (10,000) (56,331)
(20,881)
Change in notes payable....................... (282) 5,421
-
Net treasury stock activity................... (3,198) 830
(980)
Dividends paid................................ (19,482) (14,807)
(11,787)
Net cash used by financing activities........ (32,962) (19,144)
(23,648)
CASH
Effect of exchange rates on cash.............. (273) (118)
(626)
Change in cash................................ 6,843 (6,042)
(2,837)
Cash at beginning of year..................... 2,441 8,483
11,320
Cash at end of year...........................$ 9,284 $ 2,441
$ 8,483
See accompanying notes to consolidated financial statements
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Fiscal years ended December 25, 1993, December 26, 1992 and
December 28, 1991
(In thousands of dollars, except per share data)
1993 1992 1991
COMMON STOCK
Balance at beginning of year................$ 5,336 $ 2,668
$ 2,668
Stock split................................. _ 2,668
_
Balance at end of year...................... 5,336 5,336
2,668
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year................ 59,644 16,982
15,945
Sale of common stock........................ _ 38,236
_
Stock split................................. _ (2,858)
_
Stock options and other issuances........... 2,139 1,376
1,037
Issuance under long-term incentive plan..... _ 5,908
_
Balance at end of year...................... 61,783 59,644
16,982
RETAINED EARNINGS
Balance at beginning of year................ 158,754 139,096
114,942
Net earnings................................ 51,958 34,465
35,941
Cash dividends declared on common stock
($.38 per share in 1993, $.305 in 1992
and $.2475 in 1991)........................ (19,482) (14,807)
(11,787)
Balance at end of year...................... 191,230 158,754
139,096
ACCUMULATED TRANSLATION ADJUSTMENT
Balance at beginning of year................ 3,803 3,365
6,781
Equity adjustment for translation of foreign
currencies.................................. (4,360) 438
(3,416)
Balance at end of year...................... (557) 3,803
3,365
TREASURY STOCK
Balance at beginning of year................ (7,956) (18,029)
(18,712)
Sale of 2,225,680 common shares............. _ 7,507
_
Issued, primarily under stock options
(489,976 shares in 1993, 578,431 in 1992
and 481,396 in 1991)....................... 1,781 1,814
1,801
Common stock acquired (280,000 shares in
1993 and 127,000 in 1991).................. (5,103) _
(1,118)
Issuance under long-term incentive plan
(369,950 shares in 1992)................... _ 752
_
Balance at end of year...................... (11,278) (7,956)
(18,029)
DEFERRED COMPENSATION
Balance at beginning of year................ (8,129) (3,319)
(4,059)
Issuance under long-term incentive plan..... _ (6,660)
_
Amortization................................ 1,611 1,850
740
Balance at end of year...................... (6,518) (8,129)
(3,319)
Total stockholders' equity..................$239,996 $211,452
$140,763
See accompanying notes to consolidated financial statements
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share data)
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all
subsidiaries. Intercompany balances and transactions are
eliminated in consolidation. The Company's fiscal year ends on
the last Saturday in December for domestic operations and a week
earlier for most foreign operations.
TRANSLATION OF FOREIGN CURRENCIES
Foreign currency accounts are translated into U.S. dollars as
follows: exchange rates at the end of the period are used to
translate all assets and liabilities; average exchange rates
during the year are used to translate income and expense
accounts. Gains and losses resulting from the translation of
foreign currency balance sheet accounts into U.S. dollars and
related hedging transactions are included in a separate caption,
"Accumulated translation adjustment," in the stockholders' equity
section of the consolidated balance sheets.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost, less
accumulated depreciation. Depreciation expense ($10,828 in 1993,
$10,394 in 1992 and $8,813 in 1991) is computed generally on the
straight-line method using
the following ranges of asset lives: buildings and improvements -
10 to
40 years, machinery and equipment - 5 to 15 years, and furniture
and fixtures - 5 to 10 years.
Renewals and improvements which extend the useful lives of the
assets are capitalized. Capitalized leased assets and leasehold
improvements are depreciated over their useful lives or the
remaining lease term, whichever is shorter. Expenditures for
maintenance and repairs are charged to expense as incurred.
INVENTORY VALUATION
Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method for a
significant portion of chemicals inventories and the first-in,
first-out (FIFO) method for the remaining inventories.
COST IN EXCESS OF ACQUIRED NET ASSETS
The cost of acquisitions in excess of tangible and identifiable
intangible assets acquired prior to 1971 in the amount of $2,412
is not being amortized, as in the opinion of management, no
permanent impairment in value has occurred. Such costs arising
subsequent to 1970 are being amortized using the straight-line
method over periods from twenty to forty years. Accumulated
amortization amounted to $5,456 in 1993 and $4,510 in 1992.
INCOME TAXES
Effective in 1992, the Company adopted the provisions of FASB
Statement No.109 "Accounting for Income Taxes." Further
information is provided in the footnote on income taxes.
A provision has not been made for U.S. income taxes which would
be payable if undistributed earnings of foreign subsidiaries of
approximately $54,000 at December 25, 1993, were distributed to
the Company in the form of dividends, since it is management's
intention to permanently invest such earnings in the related
foreign operations. If distributed, such earnings would incur
income tax expense at substantially less than the U.S. income tax
rate, primarily because of the offset of foreign tax credits.
RESEARCH AND DEVELOPMENT
Expenditures for research and development costs are charged to
operations as incurred ($11,184 in 1993, $10,114 in 1992 and
$9,669 in 1991).
STATEMENTS OF CASH FLOWS
Cash includes bank term deposits of three months or less. Cash
payments during the years ended 1993, 1992 and 1991 included
interest of $1,556, $7,248 and $7,868 and income taxes of
$24,347, $19,786 and $17,187, respectively.
POSTRETIREMENT HEALTH CARE BENEFITS
Effective in 1992, the Company adopted the provisions of FASB
Statement No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions." Further information is provided in
the footnote on post- retirement health care benefits.
EARNINGS PER COMMON SHARE
The computation of earnings per common share is based on the
weighted average number of common and common equivalent shares
outstanding amounting to 52,175,691 in 1993, 49,967,453 in 1992
and 49,317,078 in 1991. A dual presentation of earnings per
common share has not been made since there is no significant
difference in earnings per share calculated on a primary or fully
diluted basis.
FINANCIAL INSTRUMENTS
Financial instruments are presented in the accompanying
consolidated financial statements at either cost or fair value as
required by generally accepted accounting principles. The fair
value of the Company's financial instruments approximate carrying
value.
OTHER DISCLOSURES
Included in accounts receivable are allowances for doubtful
accounts in the amount of $4,072 in 1993 and $3,736 in 1992.
Included in other current liabilities are customer deposits in
the amount of $5,757 in 1993 and $6,916 in 1992.
ACQUISITIONS
On December 31, 1990, the Company acquired the business and
certain assets and liabilities of the Sterling line of extruders
and blow molding equipment at a cost of $5,435. On May 8, 1992,
the Company acquired a pre-metallized dyes business and facility
located in Oissel, France at a cost of $21,817. The acquisitions
have been accounted for using the purchase method and,
accordingly, the acquired assets and liabilities have been
recorded at their fair values at the dates of acquisition. The
excess cost of purchase price over fair value of net assets
acquired in the amount of $5,916 is being amortized over forty
years. The operating results of each acquisition are included in
the Consolidated Statements of Earnings since the date of
acquisition.
INVENTORIES 1993
1992
Finished goods........................... $ 57,987 $
62,936
Work in process.......................... 25,748
25,448
Raw materials and supplies............... 30,197
27,304
$113,932
$115,688
At December 25, 1993, inventories valued using the last-in,
first-out (LIFO) method amounted to $60,983 ($63,653 at December
26, 1992). The LIFO reserve was not significant in 1993 and 1992.
PROPERTY, PLANT AND EQUIPMENT 1993
1992
Land..................................... $ 5,494 $
5,395
Buildings and improvements............... 55,537
54,151
Machinery and equipment.................. 101,285
93,658
Furniture and fixtures................... 3,470
3,335
Construction in progress................. 7,526
6,575
173,312
163,114
Less accumulated depreciation............ 73,387
64,287
$ 99,925 $
98,827
DEBT
Long-term debt is summarized as follows:
1993
1992
Revolving credit loans.....................$10,000 $20,000
Industrial revenue bonds................... 4,000 4,000
Total long-term debt..............$14,000 $24,000
In December 1992, the Company repaid certain long-term debt in
the amount of $52,000 utilizing proceeds from the sale of
common stock and short-term borrowings. An aftertax penalty of
$3,000 was realized on the early extinguishment of such debt.
The industrial revenue bonds mature in 1997 and carry an interest
rate that
fluctuates within the tax exempt market. The average interest
rate incurred in 1993 was 2.4%. The bonds are secured by a bank
letter of credit.
The Company has a credit agreement with a group of five banks
providing for up to $70,000 of revolving credit loans through
September 28, 1996. The agreement calls for interest at the prime
rate on revolving loans, but offers pricing options based on
certificate of deposit and Eurodollar rates which generally are
more favorable than the prime rate option. The Company must pay
an annual fee of 5/16% of the total unused commitment. The
covenants of the revolving credit agreement impose restrictions
on the Company with respect to debt and tangible net worth
levels. These restrictions are not expected to adversely affect
the Company's operations. At December 25, 1993, the $10,000
borrowed under the revolving credit agreement bore an interest
rate of 3.5%.
At December 25, 1993, notes payable outstanding of $5,100 bore an
interest
rate of 3.2%.
The aggregate annual maturities of long-term debt are $10,000 in
1996 and
$4,000 in 1997.
LEASES
The future minimum rental payments under operating leases having
initial or
remaining non-cancelable lease terms in excess of one year (as of
December
25, 1993) total $23,585 as follows: $5,127 in 1994, $4,519 in
1995, $3,744 in 1996, $2,838 in 1997, $2,419 in 1998 and $4,938
in later years. Total rental expense for all operating leases was
$6,509 in 1993, $6,379 in 1992, and $6,004 in 1991.
All long-term leases expire prior to 2013. Real estate taxes,
insurance and maintenance expenses generally are obligations of
the Company and, accordingly, are not included as part of rental
payments. It is expected that, in the normal course of business,
leases that expire will be renewed or replaced by leases on other
properties.
CAPITAL STOCK
In April 1992, the shareholders approved an increase in the
number of authorized common shares from 60,000,000 to 250,000,000
shares and the Board of Directors declared a two-for-one stock
split payable on May 22, 1992. The Company is authorized to issue
250,000 shares of preferred stock without par value, none of
which are outstanding.
There are 53,361,072 common shares issued, of which 2,069,547
shares and 2,279,523 shares were held in the treasury at December
25, 1993 and December 26, 1992, respectively. In December 1992,
the Company sold 2,225,680 shares of common stock through a
public offering. The net proceeds were used to repay certain
long-term debt.
Preferred share purchase rights (Rights) outstanding with respect
to each share of the Company's common stock entitle the holder to
purchase one eight-hundredth of a share of Series A Junior
Participating Preferred Stock at an exercise price of $18.75. The
Rights cannot become exercisable until ten days following a
public announcement that a person or group has acquired 20% or
more of the common shares of the Company or intends to make a
tender or exchange offer which would result in their ownership of
20% or more of the Company's common shares. The Rights also
entitle the holder under certain circumstances to receive shares
in another company which acquires the Company or merges with it.
INCOME TAXES
Effective in 1992, the Company adopted the provisions of FASB
Statement No.
109 "Accounting for Income Taxes" resulting in a cumulative
charge of $300.
Total income tax expense for 1992 amounted to $19,579 and was
allocated as follows: earnings from operations $25,072,
cumulative effect of accounting changes ($3,424) and
extraordinary loss on early extinguishment of debt ($2,069).
The components of earnings from operations before income taxes
and taxes are as follows:
1993 1992
1991
PRETAX EARNINGS:
Domestic................................ $68,498 $53,732
$43,243
Foreign................................. 13,975 14,605
13,357
Total................................... $82,473 $68,337
$56,600
TAXES:
DOMESTIC
Current taxes ...................... $27,857 $18,104
$17,031
Deferred taxes ..................... (587) 2,237
(509)
$27,270 $20,341
$16,522
FOREIGN
Current taxes....................... $ 2,318 $ 5,688
$ 4,696
Deferred taxes...................... 927 (957)
(559)
$ 3,245 $ 4,731
$ 4,137
TOTAL
Current taxes....................... $30,175 $23,792
$21,727
Deferred taxes...................... 340 1,280
(1,068)
$30,515 $25,072
$20,659
The following is a percentage reconciliation of computed
"expected" tax
expense:
1993 1992
1991
Computed "expected" tax expense.......... 35.0% 34.0%
34.0%
State taxes (net of U.S. tax benefit).... 3.6 3.4
3.3
Foreign tax differential................. (2.0) (.3)
(.7)
Other, net............................... .4 (.4)
(.1)
37.0% 36.7%
36.5%
Deferred income taxes are comprised of temporary differences
between financial and taxable income. The components of the net
deferred tax asset as of December 25, 1993 and December 26, 1992,
are as follows:
1993
1992
Deferred tax asset
Inventory obsolescence reserve and
overhead capitalization...................$ 2,431 $
2,035
Bad debt reserves .......................... 480
355
Deferred compensation liability ............ 879
424
Various expense accruals ................... 1,782
1,802
Accrued postretirement liability ........... 3,738
3,724
Total deferred tax assets ................ 9,310
8,340
Deferred tax liability - depreciation ........ (8,806)
(7,496)
Net deferred tax asset .....................$ 504 $
844
Total deferred tax assets for 1993 and 1992 include current
assets of $5,231 and $4,740, respectively. The deferred tax
liability is non-current for 1993 and 1992.
CONTINGENCIES
In the normal course of its business, the Company is subject to
investigations, claims and legal proceedings, some of which
concern environmental matters, involving both private and
governmental parties. In some cases, the remedies sought or
damages claimed may be substantial. While each of these matters
is subject to various uncertainties as to outcome, and some of
them may be decided unfavorably to the Company, based on the
facts known to the Company at December 25, 1993, and on
consultation with legal counsel, management believes that there
are no such matters pending or threatened which will have a
material effect on the financial position of the Company or the
results of the Company's operations in any given year.
OTHER INCOME
Major items in other income are as follows:
1993 1992
1991
Interest income $ (469) $ (722) $
(970)
Royalty income (413) (523)
(383)
Gain on foreign exchange (319) (1,091)
(1,242)
Miscellaneous (4) (242)
298
$(1,205) $(2,578)
$(2,297)
STOCK INCENTIVE PLANS
On April 13, 1993, the stockholders approved the Crompton &
Knowles Corporation 1993 Stock Option Plan for Non-Employee
Directors. The Plan authorizes 100,000 shares to be optioned to
non-employee directors at the rate of their annual retainer
divided by the stock price on the date of grant. The option will
vest over a two year period and be exercisable over a ten year
period from the date of grant, at a price equaling the fair
market value on the date of grant. An initial grant of 6,736
shares was made in 1993.
The 1988 Long Term Incentive Plan (the 1988 Plan) authorizes the
Board to grant stock options, stock appreciation rights,
restricted stock and long-term performance awards to the officers
and other key employees of the Company over a period of ten
years. Non-qualified and incentive stock options may be granted
under the 1988 Plan at prices not less than 100% of the market
value on the date of the grant. All outstanding options will
expire not more than ten years and one month from the date of
grant. There were 4,000,000 shares of common stock reserved for
awards under the 1988 Plan.
In 1989, 736,000 shares of treasury stock were transferred to an
independent trustee to administer long-term performance awards
under the 1988 Plan. The market value of the shares at the time
of grant, in the amount of $2,804, is being amortized over the
estimated service period of seven years.
In 1990, 335,800 shares of restricted stock were granted to
certain officers and key employees. The shares are being held by
an independent trustee until they vest with the recipients upon
their retirement or earlier termination of employment. The market
value of the shares at the time of grant, in the amount of
$2,435, is being amortized over the estimated service period of
fifteen years.
In 1992, 369,950 shares of treasury stock were transferred to an
independent trustee to administer long-term performance awards.
The market value of the shares at the time of grant, in the
amount of $6,660, is being amortized over the estimated service
period of six years.
Changes during 1993, 1992 and 1991 in shares under option are
summarized as follows:
Price Per Share
Range Average
Shares
Outstanding at 12/29/90...............$ .91-9.32 $ 3.98
2,452,800
Granted........................... 18.32 18.32
228,400
Exercised......................... .91-9.32 2.63
(471,590)
Lapsed............................ 4.01-9.32 6.00
(10,672)
Outstanding at 12/28/91............... 1.29-18.32 5.75
2,198,938
Granted........................... 18.19-22.78 19.16
224,250
Exercised......................... 1.29-9.31 3.40
(483,954)
Lapsed............................ 4.01-9.31 8.18
(9,334)
Outstanding at 12/26/92...............$ 1.29-22.78 $ 7.88
1,929,900
Granted .......................... 19.31-23.75 19.45
218,736
Exercised ........................ 1.29-18.31 2.87
(424,419)
Lapsed ........................... 4.01-19.19 14.01
(6,667)
Outstanding at 12/25/93 ..............$ 2.15-23.75 $ 10.57
1,717,550
Exercisable at 12/25/93 ..............$ 2.15-19.19 $ 8.03
1,302,294
Shares available for grant at December 25, 1993, and December 26,
1992, were 1,360,037 and 1,472,606, respectively.
The Company has an Employee Stock Ownership Plan that is offered
to eligible employees of the Company and certain of its
subsidiaries. The Company makes contributions equivalent to a
stated percentage of employee contributions. The Company's
contributions were $1,617, $1,276 and $895 in 1993, 1992 and
1991,respectively.
PENSIONS
The Company maintains a defined contribution pension plan for
eligible employees under provisions of section 401(k) of the
Internal Revenue Code.
The plan provides for Company contributions at a certain
percentage of each participant's salary and allows voluntary
tax-deferred employee contributions up to a stated percentage of
salary. Other foreign and domestic pension plans are not
significant. Total pension expense aggregated $4,036 in 1993,
$3,853 in 1992 and $3,162 in 1991.
POSTRETIREMENT HEALTH CARE BENEFITS
Effective January 1, 1992, the Company adopted the provisions of
FASB Statement No.106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions." The Company elected to record
immediately the transition
obligation, resulting in a one-time aftertax charge to earnings
of $5,500 or $.11 per share. The charge represents the aftertax
present value of post-retirement health benefits attributable to
past service of eligible retired and active employees under the
Company's postretirement health care benefit plans. Prior to
1992, the Company recognized the cost of providing postretirement
health care benefits on a cash basis, which had an insignificant
impact on net earnings. In 1993 and 1992, the postretirement
health care benefit expense did not have a material effect on net
earnings.The financial status of the accrued postretirement
liability is as follows:
1993
1992
Retirees......................................$ 4,056 $
4,067
Fully eligible active participants............ 1,956
1,445
Other active participants..................... 3,277
3,262
Total accumulated postretirement liability.... 9,289
8,774
Unrecognized actuarial loss................... (205)
_
Accrued postretirement liability..............$ 9,084 $
8,774
For measurement purposes, a 13.5% annual rate of increase in the
per capita cost of covered health care benefits was assumed for
1993. The rate is assumed to decrease 1% per year to 6.5% in
2000 and remain at that level thereafter. The weighted-average
discount rate used in determining the accumulated postretirement
benefit obligation was 7.0%. An increase in the assumed health
care cost rate of 1% in each year would increase the accumulated
postretirement benefit obligation by approximately $1,634.
FOREIGN OPERATIONS
Financial data applicable to the Company's foreign operations are
as follows:
1993 1992
1991
Net sales.................................$103,356 $104,307
$ 71,122
Net earnings..............................$ 10,730 $ 9,874
$ 9,220
Assets....................................$ 82,789 $ 81,733
$ 58,123
SUMMARIZED UNAUDITED QUARTERLY FINANCIAL DATA
1993
First Second
Third Fourth
Net sales........................$133,743 $147,677 $134,031
$142,897
Gross profit..................... 42,681 48,853 42,783
43,090
Net earnings..................... 12,295 15,653 11,506
12,504
Net earnings per common share.... 24 .30 .22
.24
Common dividends per share....... .08 .10 .10
.10
Market price per common share:
High............................. 24 3/4 27 1/4 23
1/4 23 7/8
Low.............................. 21 3/8 21 19
17 5/8
1992
First Second
Third Fourth
Net sales........................$113,641 $134,629 $131,849
$137,599
Gross profit..................... 37,386 43,675 39,535
40,033
Earnings before cumulative effect
of accounting changes and extra-
ordinary loss................... 9,874 12,865 10,079
10,447
Net earnings..................... 4,074 12,865 10,079
7,447
Earnings per common share before
cumulative effect of accounting
changes and extraordinary loss.. .20 .26 .20
.21
Net earnings per common share.... .08 .26 .20
.15
Common dividends per share....... .065 .08 .08
.08
Market price per common share:
High............................. 23 7/8 20 5/8 20
7/8 22 1/8
Low.............................. 18 16 16
3/4 17 5/8
BUSINESS SEGMENT DATA
Sales by segment represent sales to unaffiliated customers only.
Intersegment sales and transfers between geographic areas are
nominal and have not been disclosed separately. Operating profit
is defined as total revenue less operating expenses. In computing
operating profit, the following items have not been deducted: net
corporate expenses, interest expense and income taxes.
Identifiable assets by segment are those assets that are used in
the Company's operations in each segment. Corporate assets are
principally cash, prepayments and other assets maintained for
general corporate purposes.
Information by Business Segment
1993 1992
1991
SALES
Specialty chemicals.......................$407,280 $395,192
$340,910
Specialty process equipment and controls.. 151,068 122,526
109,318
$558,348 $517,718
$450,228
OPERATING PROFIT
Specialty chemicals.......................$ 68,067 $ 63,407
$ 51,487
Specialty process equipment and controls.. 25,967 20,009
19,978
94,034 83,416
71,465
General corporate expenses, net........... (10,468) (8,095)
(7,446)
Interest expense.......................... (1,093) (6,984)
(7,419)
Earnings before income taxes..............$ 82,473 $ 68,337
$ 56,600
IDENTIFIABLE ASSETS
Specialty chemicals.......................$281,804 $278,931
$252,375
Specialty process equipment and controls.. 69,279 58,099
47,272
351,083 337,030
299,647
Corporate................................. 12,163 13,685
8,915
$363,246 $350,715
$308,562
DEPRECIATION AND AMORTIZATION
Specialty chemicals.......................$ 10,628 $ 10,332
$ 8,628
Specialty process equipment and controls.. 1,324 1,186
1,277
11,952 11,518
9,905
Corporate................................. 124 117
123
$ 12,076 $ 11,635
$ 10,028
CAPITAL EXPENDITURES
Specialty chemicals.......................$ 12,057 $ 11,669
$ 10,639
Specialty process equipment and controls.. 2,131 1,125
772
14,188 12,794
11,411
Corporate................................. 111 41
23
$ 14,299 $ 12,835
$ 11,434
INFORMATION BY MAJOR GEOGRAPHIC SEGMENT
1993 1992
1991
SALES
United States.............................$454,992 $413,411
$379,106
Europe.................................... 93,808 94,791
61,542
Canada.................................... 9,548 9,516
9,580
$558,348 $517,718
$450,228
EXPORTS TO UNAFFILIATED CUSTOMERS
Included in United States sales:
Far East................................$ 26,244 $ 19,177
$ 7,435
Latin America........................... 10,183 7,681
9,891
Europe.................................. 7,251 4,318
5,396
Canada.................................. 3,500 3,263
8,382
Other................................... 838 785
418
Total................................. 48,016 35,224
31,522
Included in European sales:
Far East................................ 8,649 7,413
6,661
Latin America........................... 4,261 2,768
2,279
Other................................... 3,756 5,355
5,001
Total................................. 16,666 15,536
13,941
$ 64,682 $ 50,760
$ 45,463
OPERATING PROFIT
United States.............................$ 79,536 $ 68,617
$ 59,754
Europe.................................... 13,736 13,108
9,463
Canada.................................... 762 1,691
2,248
$ 94,034 $ 83,416
$ 71,465
IDENTIFIABLE ASSETS
United States.............................$280,457 $268,982
$250,439
Europe.................................... 77,203 76,439
53,510
Canada.................................... 5,586 5,294
4,613
$363,246 $350,715
$308,562
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The accompanying financial statements have been prepared in
conformity with
generally accepted accounting principles and have been audited by
KPMG Peat Marwick, Independent Certified Public Accountants,
whose report is presented herein.
Management of the Company assumes responsibility for the accuracy
and reliability of the financial statements. In discharging such
responsibility, management has established certain standards
which are subject to continuous review and are monitored through
the Company's financial management and internal audit group.
The Board of Directors pursues its oversight role for the
financial statements through its Audit Committee which consists
of outside directors. The Audit Committee meets on a regular
basis with representatives of management, the internal audit
group and KPMG Peat Marwick.
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS
CROMPTON & KNOWLES CORPORATION
We have audited the consolidated balance sheets of Crompton &
Knowles Corporation and subsidiaries as of December 25, 1993 and
December 26, 1992 and the related consolidated statements of
earnings, stockholders' equity and cash flows for each of the
fiscal years in the three-year period ended December 25, 1993.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Crompton & Knowles Corporation and subsidiaries at
December 25, 1993 and December 26, 1992 and the results of their
operations and their cash flows for each of the fiscal years in
the three-year period ended December 25, 1993 in conformity with
generally accepted accounting principles.
In 1992, as discussed in the notes to consolidated financial
statements, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and
Statement No. 109, "Accounting for Income Taxes."
/S/KPMG PEAT MARWICK
Stamford, Connecticut
January 20, 1994
ELEVEN YEAR SELECTED FINANCIAL DATA
(In thousands of dollars except per share data) 1993
1992 1991 1990
SUMMARY OF OPERATIONS
Net sales....................... $558,348 517,718 450,228
390,032
Interest expense................ $ 1,093 6,984 7,419
5,842
Pretax earnings................. $ 82,473 68,337 56,600
47,260
Income taxes.................... $ 30,515 25,072 20,659
17,250
Earnings from continuing
operations..................... $ 51,958 43,265 35,941
30,010
Cumulative effect of accounting
changes........................ $ _ (5,800) _
_
Extraordinary loss on early
extinguishment of debt......... $ _ (3,000) _
_
Earnings (loss) from
discontinued operations........ $ _ _ _
_
Loss on disposal of discontinued
operations..................... $ _ _ _
_
Net earnings.................... $ 51,958 34,465 35,941
30,010
PER SHARE STATISTICS
Earnings from continuing
operations before cumulative
effect of accounting changes
and extraordinary loss......... $ 1.00 .87 .73
.61
Net earnings.................... $ 1.00 .69 .73
.61
Dividends....................... $ .38 .31 .25
.20
Book value...................... $ 4.68 4.14 2.94
2.47
Common stock
trading range: High......... 27 1/4 23 7/8 20
1/4 11 5/8
Low.......... 17 5/8 16 8
3/8 6 3/4
Average shares outstanding
(thousands).................... 52,176 49,967 49,317
49,270
FINANCIAL POSITION
Current assets.................. $220,396 207,383 185,235
164,442
PP&E, net....................... $ 99,925 98,827 80,154
76,709
Other assets.................... $ 42,925 44,505 43,173
41,493
Total assets.................... $363,246 350,715 308,562
282,644
Current liabilities............. $ 95,439 102,593 85,712
88,340
Long-term debt.................. $ 14,000 24,000 76,118
70,330
Accrued postretirement
liability...................... $ 9,084 8,774 _
_
Deferred income taxes........... $ 4,727 3,896 5,969
6,409
Stockholders' equity............ $239,996 211,452 140,763
117,565
Current ratio................... 2.3 2.0 2.2
1.9
Total debt-to-equity %.......... 8.0 13.9 57.1
77.6
Total debt-to-capital %......... 7.4 12.2 36.3
43.7
PROFITABILITY STATISTICS
(CONTINUING OPERATIONS)
% Effective tax rate............ 37.0 36.7 36.5
36.5
% Return on sales............... 9.3 8.4 8.0
7.7
% Return on average total
capital........................ 21.0 19.3 18.9
19.8
% Return on average common
equity......................... 23.1 27.1 28.4
28.1
OTHER STATISTICS
(CONTINUING OPERATIONS)
Capital spending................ $ 14,299 12,835 11,434
16,374
Depreciation.................... $ 10,828 10,394 8,813
7,156
Sales per employee.............. $ 240 237 222
218
<PAGE>
ELEVEN YEAR SELECTED FINANCIAL DATA
(In thousands of dollars except per share data) 1989
1988 1987 1986
SUMMARY OF OPERATIONS
Net sales....................... $355,817 289,787 199,394
178,256
Interest expense................ $ 6,006 3,606 2,042
789
Pretax earnings................. $ 38,588 26,943 20,353
16,800
Income taxes.................... $ 14,087 10,098 8,341
7,421
Earnings from continuing
operations..................... $ 24,501 16,845 12,012
9,379
Cumulative effect of accounting
changes........................ $ _ _ _
_
Extraordinary loss on early
extinguishment of debt......... $ _ _ _
_
Earnings (loss) from
discontinued operations........ $ _ (597) (262)
(678)
Loss on disposal of
discontinued operations........ $ _ (920) _
(7,700)
Net earnings.................... $ 24,501 15,328 11,750
1,001
PER SHARE STATISTICS
Earnings from continuing
operations before cumulative
effect of accounting changes
and extraordinary loss......... $ .50 .36 .25
.17
Net earnings.................... $ .50 .32 .24
.01
Dividends....................... $ .15 .11 .08
.08
Book value...................... $ 2.08 1.75 1.59
1.42
Common stock
trading range: High......... 7 7/8 4 1/2 3
7/8 2 1/2
Low.......... 3 3/4 2 1/2 2
1/4 1 5/8
Average shares outstanding
(thousands).................... 49,064 47,239 48,168
50,974
FINANCIAL POSITION
Current assets.................. $127,216 120,584 94,069
95,931
PP&E, net....................... $ 50,847 43,685 29,085
28,511
Other assets.................... $ 39,787 41,373 12,075
10,349
Total assets.................... $217,850 205,642 135,229
134,791
Current liabilities............. $ 71,068 72,352 40,922
41,687
Long-term debt.................. $ 41,213 44,594 12,927
19,455
Accrued postretirement
liability...................... $ _ _ _
_
Deferred income taxes........... $ 6,668 6,775 5,575
5,174
Stockholders' equity............ $ 98,901 81,921 75,805
68,475
Current ratio................... 1.8 1.7 2.3
2.3
Total debt-to-equity %.......... 52.4 72.1 25.1
47.0
Total debt-to-capital %......... 34.4 41.9 20.1
32.0
PROFITABILITY STATISTICS
(CONTINUING OPERATIONS)
% Effective tax rate............ 36.5 37.5 41.0
44.2
% Return on sales............... 6.9 5.8 6.0
5.3
% Return on average total
capital........................ 19.3 17.2 14.8
13.6
% Return on average common
equity......................... 27.6 22.7 17.7
15.0
OTHER STATISTICS
(CONTINUING OPERATIONS)
Capital spending................ $ 13,407 6,798 3,523
2,967
Depreciation.................... $ 5,666 4,658 3,468
3,101
Sales per employee.............. $ 215 190 168
146
<PAGE>
ELEVEN YEAR SELECTED FINANCIAL DATA
(In thousands of dollars except per share data) 1985
1984 1983
SUMMARY OF OPERATIONS
Net sales........................ $ 163,287 155,435
147,786
Interest expense................. $ 571 1,011
1,445
Pretax earnings.................. $ 15,443 14,255
10,306
Income taxes..................... $ 7,122 6,368
4,628
Earnings from continuing
operations...................... $ 8,321 7,887
5,678
Cumulative effect of accounting
changes......................... $ - -
-
Extraordinary loss on early
extinguishment of debt.......... $ - -
-
Earnings (loss) from discontinued
operations...................... $ (746) 4
624
Loss on disposal of discontinued
operations...................... $ - -
-
Net earnings..................... $ 7,575 7,891
6,302
PER SHARE STATISTICS
Earnings from continuing
operations before cumulative
effect of accounting changes
and extraordinary loss.......... $ .15 .14
.10
Net earnings..................... $ .14 .14
.11
Dividends........................ $ .08 .07
.07
Book value....................... $ 1.34 1.26
1.25
Common stock
trading range: High.......... 1 3/4 1 1/2
1 7/8
Low........... 1 1/4 1 1/4
1 1/8
Average shares outstanding
(thousands)..................... 51,694 51,418
50,948
FINANCIAL POSITION
Current assets................... $ 87,400 82,125
82,068
PP&E, net........................ $ 30,376 30,809
31,205
Other assets..................... $ 12,146 11,964
14,015
Total assets..................... $ 129,922 124,898
127,288
Current liabilities.............. $ 32,366 31,149
30,732
Long-term debt................... $ 19,093 20,322
24,459
Accrued postretirement liability. $ - -
-
Deferred income taxes............ $ 4,708 4,031
3,697
Stockholders' equity............. $ 73,755 69,396
68,400
Current ratio.................... $ 2.7 2.6
2.7
Total debt-to-equity %........... 30.5 35.3
42.8
Total debt-to-capital %.......... 23.4 26.1
30.0
PROFITABILITY STATISTICS
(CONTINUING OPERATIONS)
% Effective tax rate............. 46.1 44.7
44.9
% Return on sales................ 5.1 5.1
3.8
% Return on average total
capital......................... 13.2 12.8
9.3
% Return on average common
equity.......................... 14.3 14.4
10.6
OTHER STATISTICS
(CONTINUING OPERATIONS)
Capital spending................. $ 2,888 3,185
2,184
Depreciation..................... $ 3,061 2,973
2,891
Sales per employee............... $ 128 123
126
RETURN ON SALES
Continuing Operations
(bar graph referencing ELEVEN YEAR SELECTED FINANCIAL DATA)
RETURN ON AVERAGE TOTAL CAPITAL
Continuing Operations
(bar graph referencing ELEVEN YEAR SELECTED FINANCIAL DATA)
SALES PER EMPLOYEE
Continuing Operations
(bar graph referencing ELEVEN YEAR SELECTED FINANCIAL DATA)
CORPORATE OFFICERS AND OPERATING MANAGEMENT
Vincent A. Calarco
Chairman, President and
Chief Executive Officer
Robert W. Ackley
Vice President
President - Davis-Standard Division
Nicholas Fern, Ph.D.
President - International Dyes and Chemicals Division
Edmund H. Fording
Vice President
President - Dyes and Chemicals Division
Marvin H. Happel
Vice President - Organization
Charles J. Marsden
Vice President - Finance and Chief Financial Officer
Frank H. Schoonyoung
President - Ingredient Technology Division
Peter Barna
Treasurer and
Principal Accounting Officer
John T. Ferguson, II
General Counsel and Secretary
Robert A. Marchitello
Assistant Treasurer
(photo caption)
Corporate Management Committee of Crompton & Knowles
(standing from left to right)
Peter Barna, John T. Ferguson, II, Vincent A. Calarco, Marvin H.
Happel, and Robert W. Ackley,
(seated from left to right)
Frank H. Schoonyoung, Charles J. Marsden, and Edmund H. Fording
(not present - Nicholas Fern)
CORPORATE DATA
DIRECTORS
3 James A. Bitonti
President and
Chief Executive Officer
TCOM, L.P.
1,2 Harry W. Buchanan
Retired Vice President
Celanese Corporation
Vincent A. Calarco
Chairman of the Board
President and
Chief Executive Officer
2,3 Robert A. Fox
President and
Chief Executive Officer
Foster Farms
2,3 Roger L. Headrick
President and
Chief Executive Officer
Minnesota Vikings Football Club
1,2 Leo I. Higdon
Dean
The Darden Graduate
School of Business Administration
University of Virginia
1,3 Michael W. Huber
Retired Chairman of the Board
J.M. Huber Corporation
1,3 Warren A. Law
Retired Professor
Graduate School of
Business Administration
Harvard University
Charles J. Marsden
Vice President-Finance and
Chief Financial Officer
1,2 C.A. Piccolo
Chairman and
Chief Executive Officer
Caremark International Inc.
1 Howard B. Wentz, Jr.
Chairman of the Board
ESSTAR Incorporated
Chairman of the Board
Tambrands Inc.
1 Member of Audit Committee
2 Member of Nominating Committee
3 Member of Committee on Executive Compensation
Copyright 1994 Crompton &Knowles Corporation.
All rights reserved.
CORPORATE HEADQUARTERS
One Station Place, Metro Center
Stamford, CT 06902
(203) 353-5400
AUDITORS
KPMG Peat Marwick
Stamford, CT
TRANSFER AGENT AND REGISTRAR
Mellon Securities Transfer Services
Pittsburgh, PA
(800) 288-9541
ANNUAL MEETING
The annual meeting of stockholders will be held at 11:15 a.m. on
Tuesday, April 12, 1994, at The Metropolitan Club, 1 East 60th
Street, New York, New York
FORM 10-K
A copy of the Company's report on Form 10-K for 1993, as filed
with the Securities and Exchange Commission, may be obtained free
of charge by writing to the Secretary of the Corporation, One
Station Place, Metro Center, Stamford, CT 06902
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Board of Directors
Crompton & Knowles Corporation:
We consent to incorporation by reference in the Registration
Statements (No.'s 33-21246, 33-42280 and 33-67600) on Form S-8 of
Crompton & Knowles Corporation of our reports dated January 20,
1994, relating to the consolidated balance sheets of Crompton &
Knowles Corporation and subsidiaries as of December 25, 1993 and
December 26, 1992, and the related consolidated statements of
earnings, stockholders' equity and cash flows and related schedules
for each of the fiscal years in the three-year period ended
December 25, 1993, which reports appear or are incorporated by
reference in the December 25,, 1993 Annual Report on Form 10-K of
Crompton & Knowles Corporation. Our report refers to changes in
accounting for postretirement benefits other than pensions and
income taxes. We also consent to incorporation by reference in the
Registration Statement (No. 33-21246) on Form S-8 of Crompton &
Knowles Corporation of our report dated March 14, 1994 relating to
the statements of financial condition of Crompton & Knowles
Corporation Employee Stock Ownership Plan as of December 31, 1993
and 1992, and the related statements of income and changes in plan
equity for each of the years in the three-year period ended
December 31, 1993, as included in Exhibit 29 of said Form 10-K.
/s/ KPMG Peat Marwick
Stamford, Connecticut
March 14, 1994
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned officers and directors of Crompton & Knowles
Corporation, hereby severally constitute and appoint Vincent A.
Calarco, Charles J. Marsden, and John T. Ferguson, II, and each of
them severally, our true and lawful attorneys or attorney, with
full power to them and each of them to execute for us, and in our
names in the capacities indicated below, and to file with the
Securities and Exchange Commission the Annual Report on Form 10-K
of Crompton & Knowles Corporation for the fiscal year ended
December 25, 1993, and any and all amendments thereto.
IN WITNESS WHEREOF, we have signed this Power of Attorney in the
capacities indicated on January 25, 1994.
Signature Title
Principal Executive Officer:
/s/ Vincent A. Calarco Chairman of the Board,
Vincent A. Calarco President, CEO and Director
Principal Financial
Officer:
/s/ Charles J. Marsden Vice President, Finance
Charles J. Marsden and Director
Principal Accounting Officer:
/s/ Peter Barna Treasurer
Peter Barna
/s/ James A. Bitonti Director
James A. Bitonti
/s/ Harry W. Buchanan Director
Harry W. Buchanan
/s/ Robert A. Fox Director
Robert A. Fox
/s/ Roger L. Headrick Director
Roger L. Headrick
/s/ Leo I. Higdon, Jr. Director
Leo I. Higdon, Jr.
/s/ Michael W. Huber Director
Michael W. Huber
/s/ Warren A. Law Director
Warren A. Law
/s/ C.A. Piccolo Director
C.A. Piccolo
/s/ Howard B. Wentz, Jr. Director
Howard B. Wentz, Jr.
EXHIBIT 27
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS AND SCHEDULES
(FORM 10-K)
December 25, 1993, December 26, 1992 and December 28, 1991
<PAGE>
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Independent Auditors' Report on Financial Statement Schedules.
Consolidated Financial Statements:
The following consolidated financial information and
Independent
Auditors' Report are included in the Corporation's 1993 Annual
Report to
Stockholders, attached hereto as Exhibit 13 and incorporated herein
(references are to page numbers in the Annual Report):
Management's Discussion and Analysis
(Not Covered by Independent Auditors's Report) . . . . . . .
. .10-13
Consolidated Statements of Earnings for
the Fiscal Years ended December 25, 1993,
December 26, 1992 and December 28, 1991 . . . . . . . .
. . . 14
Consolidated Balance Sheets as of
December 25, 1993 and December 26, 1992 . . . . . . . .
. . . 15
Consolidated Statements of Cash Flows for the
Fiscal Years ended December 25, 1993,
December 26, 1992 and December 28, 1991 . . . . . . . .
. . . 16
Consolidated Statements of Stockholders'
Equity for the Fiscal Years ended
December 25, 1993, December 26, 1992 and December 28, 1991 .
. . . 17
Notes to Consolidated Financial Statements . . . . . . . . .
. 18-24
Independent Auditor's Report . . . . . . . . . . . . . . . .
. . . 25
Selected Financial Data for the Eleven Years ended December
25, 1993
(Not Covered by Independent Auditors' Report) . . . . . . .
. . 26-27
Schedules:
V - Property, Plant and Equipment - Fiscal Years ended
December 25, 1993, December 26, 1992 and December 28,
1991.
VI - Accumulated Depreciation of Property, Plant and Equipment
- -
Fiscal Years ended December 25, 1993, December 26, 1992
and
December 28, 1991.
VIII - Valuation and Qualifying Accounts - Fiscal Years ended
December 25, 1993, December 26, 1992 and December 28,
1991.
IX - Short-term Borrowings - Fiscal Years ended December 25,
1993,
December 26, 1992 and December 28, 1991.
All other schedules are omitted because they are not applicable or
the
required information is shown in the consolidated financial
statements or
the notes thereto.
F-1
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
Board of Directors
Crompton & Knowles Corporation:
Under date of January 20, 1994, we reported on the consolidated
balance sheets of Crompton & Knowles Corporation and subsidiaries
as of December 25, 1993 and December 26, 1992, and the related
consolidated statements of earnings, stockholders' equity and cash
flows for each of the fiscal years in the three-year period ended
December 25, 1993, as contained in the 1993 Annual Report to
Stockholders. Our report refers to changes in accounting for
postretirement benefits other than pensions and income taxes.
These consolidated financial statements and our report thereon are
incorporated by reference in the Annual Report on Form 10-K of
Crompton & Knowles Corporation for the fiscal year 1993. In
connection with our audits of the aforementioned consolidated
financial statements, we also have audited the financial statement
schedules as listed in the accompanying index. These financial
statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered
in relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the information
set forth therein.
/s/ KPMG Peat Marwick
Stamford, Connecticut
January 20, 1994
Schedule V
CROMPTON & KNOWLES
CORPORATION AND SUBSIDIARIES
Property, Plant and
Equipment
(In thousands of
dollars)
(1)
Balance at
Adjustments Balance
beginning Additions
Retirements and Reclassi- at end
of year at cost or
sales fications of year
Fiscal Year ended December 25, 1993:
Land $ 5,395 $ 193 $
- - $ (94) $ 5,494
Buildings and improvements 54,151 666
(243) 963 55,537
Machinery and equipment 93,658 1,265
(771) 7,133 101,285
Furniture and fixtures 3,335 127
(40) 48 3,470
Construction in progress 6,575 12,048 (2)
- - (11,097) 7,526
$163,114 $14,299 $
(1,054) $ (3,047) $173,312
Fiscal Year ended December 26, 1992:
Land $ 3,453 $ 1,823 $
- - $ 119 $ 5,395
Buildings and improvements 44,404 6,816
(63) 2,994 54,151
Machinery and equipment 77,561 10,038
(1,167) 7,226 93,658
Furniture and fixtures 3,220 69
(82) 128 3,335
Construction in progress 6,185 9,209 (2)
- - (8,819) 6,575
$134,823 $27,955 (3) $
(1,312) $ 1,648 $163,114
Fiscal Year ended December 28, 1991:
Land $ 3,358 $ - $
- - $ 95 $ 3,453
Buildings and improvements 41,957 619
(23) 1,851 44,404
Machinery and equipment 65,015 2,661
(651) 10,536 77,561
Furniture and fixtures 3,173 174
(38) (89) 3,220
Construction in progress 9,978 9,665 (2)
- - (13,458) 6,185
$123,481 $13,119 (3) $
(712) $ (1,065) $134,823
(1) Includes transfers from construction in progress to the
applicable asset categories and the impact of foreign currency
trans
(2) Includes construction costs related to the expansion and/or
improvement of plant facilities.
(3) Includes the fair value of property, plant and equipment
related to acquisitions in the amounts of $15,120 in 1992 and $1,68
lation into U.S. dollars.
5 in 1991.
Schedule VI
CROMPTON & KNOWLES
CORPORATION AND SUBSIDIARIES
Accumulated
Depreciation
of Property, Plant and
Equipment
(In thousands of
dollars)
Additions
(1)
Balance at charged to
Adjustments Balance
beginning costs and
Retirements and Reclassi at end
of year expenses or sales
fications of year
Fiscal Year ended December 25, 1993:
Buildings and improvements $17,330 $ 2,434 $ (131)
$ (286) $ 19,347
Machinery and equipment 44,771 8,188 (682)
(556) 51,721
Furniture and fixtures 2,186 206 (47)
(26) 2,319
$64,287 $10,828 $ (860)
$ (868) $ 73,387
Fiscal Year ended December 26, 1992:
Buildings and improvements $14,778 $ 2,497 $ (56)
$ 111 $ 17,330
Machinery and equipment 37,818 7,710 (952)
195 44,771
Furniture and fixtures 2,073 187 (80)
6 2,186
$54,669 $10,394 $(1,088)
$ 312 $ 64,287
Fiscal Year ended December 28, 1991:
Buildings and improvements $12,797 $ 2,026 $ (8)
$ (37) $ 14,778
Machinery and equipment 32,095 6,556 (413)
(420) 37,818
Furniture and fixtures 1,880 231 (24)
(14) 2,073
$46,772 $ 8,813 $ (445)
$ (471) $ 54,669
(1) Reflects the impact of foreign currency translation into U.S.
dollars.
Schedule VIII
CROMPTON & KNOWLES
CORPORATION AND SUBSIDIARIES
Valuation and Qualifying
Accounts
(In thousands of
dollars)
Additions
Balance at charged to
Adjustments Balance
beginning costs and
at end
of year expenses Recurring
Other of year
Fiscal Year ended December 25, 1993:
Allowance for doubtful acco$ 3,736 $ 483 $ (147)(1)
$ - $ 4,072
Accumulated amortization of cost in
excess of acquired net ass 4,510 963 (17)(2)
- 5,456
Accumulated amortization of other
intangible assets 996 285 (42)(2)
- 1,239
Fiscal Year ended December 26, 1992:
Allowance for doubtful acco$ 4,659 $ - $ (318)(1)
$ (605)(3) $ 3,736
Accumulated amortization of cost in
excess of acquired net ass 3,577 949 (16)(2)
- 4,510
Accumulated amortization of other
intangible assets 686 292 18 (2)
- 996
Fiscal Year ended December 28, 1991:
Allowance for doubtful acco$ 4,212 $ 682 $(1,339)(1)
$ 1,104 (4) $ 4,659
Accumulated amortization of cost in
excess of acquired net ass 2,659 931 (13)(2)
- 3,577
Accumulated amortization of other
intangible assets 1,277 284 (30)(2)
(845)(5) 686
(1) Represents accounts written off as uncollectible (net of
recoveries), and the translation effect of accounts denominated in
foreign currencies.
(2) Represents the translation effect of intangible assets
denominated in foreign currencies.
(3) Represents reduction in allowance for doubtful accounts
requirements.
(4) Represents allowances related to the acquisition of Sterling
Industries in 1991 .
(5) Represents intangible asset retirements.
Schedule IX
CROMPTON AND KNOWLES CORPORATION
AND SUBSIDIARIES
Short-term Borrowings
(In thousands of dollars)
At Year-End
During the Year
Weighted
Weighted
Category of average Maximum
Average average
short-term interest amount
out- amount out-interest
borrowing (1) Balance rate standing
(2)standing (3rate (4)
Fiscal Year ended Bank $ 5,100 3.2 $14,431
$ 9,800 4.6%
December 25, 1993 borrowings
Fiscal Year ended Bank $ 5,421 3.9 $18,091
$14,200 6.1%
December 26, 1992 borrowings
Fiscal Year ended Bank $ - - $ 9,416
$ 5,600 6.4%
December 28, 1991 borrowings
(1) Consists of obligations due banks with various interest rates
and maturities.
(2) Represents maximum aggregate amount at any month-end.
(3) Represents average daily domestic balances and average
month-end foreign balances.
(4) Computed by dividing actual interest expense by average debt
outstanding.
Exhibit 29
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
X Annual report pursuant to Section 15 (d) of the
Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1993
OR
Transition report pursuant to Section 15 (d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from to
Commission file number 1-4663
A. Full title of the Plan and the address of the Plan, if
different from that of the issuer named below:
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the Plan
and the address of its principal executive office:
Crompton & Knowles Corporation
One Station Place - Metro Center
Stamford, Connecticut 06902
11k93A
CROMPTON & KNOWLES CORPORATION
Employee Stock Ownership Plan
EXHIBIT INDEX
Form 11-K for the Fiscal Year Ended December 31, 1993
Exhibit Description
No. of Exhibit
1. Consent of KPMG Peat Marwick, independent certified
public accountants.
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1993 AND 1992
PLAN ASSETS AND EQUITY
1993
1992
Fixed C&K
Equity Advisers Mortgage Fixed
C&K Equity Advisers Mortgage
Income Fund Stock Fund
Fund Fund Fund Total Income Fund
Stock Fund Fund Fund Fund Total
Investments:
Common stock of Crompton
& Knowles Corporation -
1,919,290 shares at market
value (cost $ 10,417,226)
in 1993 and 2,056,509
shares at market value
(cost $ 8,768,286) in 1992 $ - $ 42,224,380 $
- $ - $ - $ 42,224,380 $ - $
45,757,325 $ - $ - $ - $ 45,757,325
Hartford Life Insurance
Company group annuity
contract 13,290,019 -
1,760,745 466,213 194,925 15,711,902 12,033,505
- 1,313,388 356,048 142,050 13,844,991
Cash and short-term
investments at cost,
which approximates market 133,705 314,546
55,918 9,121 6,888 520,178 25,164
32,460 25,764 4,563 4,894 92,845
Contribution receivable
from Crompton & Knowles
Corporation 205,991 142,674
983 7,258 7,166 364,072 65,491
268,176 18,591 4,912 3,663 360,833
Plan Assets and Equity $ 13,629,715 $ 42,681,600 $
1,817,646 $ 482,592 $ 208,979 $ 58,820,532 $ 12,124,160 $
46,057,961 $ 1,357,743 $ 365,523 $ 150,607 $ 60,055,994
\11K\93AE
See accompanying notes to
financial statements
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF INCOME AND CHANGES IN
PLAN EQUITY
FOR THE YEARS ENDED DECEMBER 31,
1993, 1992 AND 1991
1993
1992
1991
Fixed C&K
Equity Advisers Mortgage Fixed
C&K Equity Advisers Mortgage
Fixed C&K Equity
Income Fund Stock Fund Fund
Fund Fund Total Income Fund Stock
Fund Fund Fund Fund Total Income
Fund Stock Fund Fund
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments $ 1,755 $ 755,945 $
1,371 $ 352 $ 288 $ 759,711 $ 2,822 $
623,066 $ 1,391 $ 98 $ 14 $ 627,391 $
3,985 $ 507,573 $ 951 $
Realized gain on sale
of investments and
withdrawals - 4,614,837 -
- - 4,614,837 -
1,609,135 - - - 1,609,135
- 2,087,917 -
Interest earned - John
Hancock Mutual Life
Insurance Company group
annuity contract - - -
- - - 639,652 -
- - - 639,652
1,039,300 - -
Interest earned - Hartford
Life Insurance Company
group annuity contract 865,918 - -
- - 865,918 357,397 -
- - - 357,397 -
- -
Other expenses - - -
- - 0 - -
- - - -
(18) - (609)
Net investment income 867,673 5,370,782
1,371 352 288 6,240,466 999,871
2,232,201 1,391 98 14 3,233,575
1,043,267 2,595,490 342
Increase (decrease) in unrealized
appreciation of investments - (5,181,885)
206,916 42,937 8,885 (4,923,147) -
(247,893) 112,809 16,268 50 (118,766)
- 24,456,760 157,008
Contributions:
Employee Rollovers 13,566 - -
- - 13,566 73,660 -
- - - 73,660
40,571 - -
Employees 860,790 1,435,118
207,199 67,839 56,070 2,627,016 844,818
1,274,968 137,469 20,158 18,867 2,296,280
867,495 847,569 96,435
Employer - Net of
forfeitures - 1,617,481 -
- - 1,617,481 -
1,276,023 - - - 1,276,023
- 895,208 -
Withdrawals and
Distributions (1,684,871) (5,012,089)
(67,674) (42,839) (3,371) (6,810,844) (1,259,484)
(1,771,906) (32,334) (2,781) (324) (3,066,829)
(2,095,127) (1,858,147) (95,961)
Employee interfund
transfers 1,448,397 (1,605,768)
112,091 48,780 (3,500) 0 (446,172)
(394,098) 376,490 331,780 132,000 0
1,341,896 (1,284,250) (57,646)
Net increase/(decrease) in
Plan Equity for the year 1,505,555 (3,376,361)
459,903 117,069 58,372 (1,235,462) 212,693
2,369,295 595,825 365,523 150,607 3,693,943
1,198,102 25,652,630 100,178
Plan Equity at beginning
of year 12,124,160 46,057,961
1,357,743 365,523 150,607 60,055,994 11,911,467
43,688,666 761,918 - - 56,362,051
10,713,365 18,036,036 661,740
Plan Equity at end of year $ 13,629,715 $ 42,681,600 $
1,817,646 $ 482,592 $ 208,979 $ 58,820,532 $ 12,124,160 $
46,057,961 $ 1,357,743 $ 365,523 $ 150,607 $ 60,055,994
$ 11,911,467 $ 43,688,666 $ 761,918 $
\11K\93INC
See accompanying notes to financial
statements
Advisers Mortgage
Fund Fund Total
- $ - $ 512,509
- - 2,087,917
- - 1,039,300
- - -
- - (627)
- - 3,639,099
- - 24,613,768
- - 40,571
- - 1,811,499
- - 895,208
- - (4,049,235)
- - 0
- - 26,950,910
- - 29,411,141
- $ - $ 56,362,051
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Financial Statements and Schedule
December 31, 1993 and 1992
(With Independent Auditors' Report Thereon)
<PAGE>
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
DECEMBER 31, 1993 and 1992
1. Basis of Presentation
The accompanying financial statements have been prepared on an
accrual basis. Securities transactions are recorded on the
trade date, and dividend income is recorded on the ex-dividend
date.
2. Plan Description
The Employee Stock Purchase and Savings Plan was adopted by the
Board of Directors of Crompton & Knowles Corporation (the
"Corporation") on January 27, 1976. Effective July 1, 1989 the
Board of Directors amended the Plan to convert it into an
Employee Stock Ownership Plan (the "Plan"). The Plan permits
an eligible employee to elect to participate by authorizing a
withholding of an amount equal to 1%, 2%, 3%, 4%, 5% or 6% of
compensation as the basic contribution to the Plan.
Contributions by the Corporation to the Plan were made at an
amount equal to 66 2/3% of each participating employee's basic
employee contribution to the Plan.
Funds contributed under the Plan are held in a trust fund (the
"Trust") and were invested in five investment funds, the
Crompton & Knowles Stock Fund ("C&K Stock Fund"), the Fixed
Income Fund, the Equity Fund, the Advisers Fund, and the
Mortgage Fund.
The C&K Stock Fund is a fund invested entirely in common stock
of Crompton & Knowles Corporation, and contributions by the
Corporation to the Plan are invested in this fund. The market
value of the common stock is based on quotations from the New
York Stock Exchange.
The Fixed Income Fund is a fund invested under an agreement
with Hartford Life Insurance Company (the "Hartford") pursuant
to which the Hartford guarantees the repayment of principal and
the payment of interest on all amounts on deposit at an
effective annual rate of interest of 7.25% on, and after,
January 1, 1993 (7.50% for the period August 1, 1992 through
December 31, 1992).
Prior to August 1, 1992 the Fund was invested under an
agreement with John Hancock Mutual Life Insurance Company
("John Hancock") pursuant to which John Hancock guaranteed
repayment of principal and the payment of interest on all
amounts on deposit at an effective annual rate of 11.00% for
the period August 1, 1989 to July 31, 1990, and 9.75% for the
period August 1, 1990 to July 31, 1992.
Employee Stock Ownership Plan - Notes Page 2
The value of the Fixed Income Fund is based on contributions
invested and reinvested, interest earned, less withdrawals and
distributions.
The Equity Fund is a fund invested under the terms of a group
annuity contract with the Hartford in the Separate Account A,
which is a pooled separate account maintained by the Hartford
with respect to a portion of its assets, in connection with the
contract and other similar contracts issued by the Hartford.
This fund invests primarily in equity securities such as common
stocks and securities convertible into common stock. The
Equity Fund is valued based on a unit value as determined by
the fund manager as follows:
12/31/93 12/31/92
Unit Value $90.358 $78.779
Total Units Held 19,486.327 16,671.870
The related cost of the Equity Fund at December 31, 1993 was
$1,459,278, and $1,218,975 at December 31, 1992.
Prior to October 31, 1992 the Equity Fund was invested under
the terms of a group annuity contract with John Hancock in the
Pooled Common Stock Class 1L Account of Independence Investment
Associates, Inc., an affiliate of John Hancock. This fund
invested in equity securities such as common stock and
securities convertible into common stock.
The Advisers Fund is a fund invested under the terms of a group
annuity contract with the Hartford in the Separate Account V
which is a pooled separate account maintained by the Hartford
with respect to a portion of its assets, in connection with the
contract and other similar contracts issued by the Hartford.
Assets in the Separate Account V are invested in the HVA
Advisers Fund, Inc. The Hartford Investment Management Company
is an investment advisor to the fund, and Wellington Management
Company is the funds sub-advisor. This fund invests in common
stocks, debt securities, and money market instruments. The
Advisors Fund is valued based on a unit of value as determined
by the fund manager as follows:
12/31/93 12/31/92
Unit Value $1.383 $1.238
Total Units Held 337,151.770 287,585.918
The related cost of the Advisors Fund at December 31, 1993 was
$407,010, and $339,780 at December 31, 1992.
<PAGE>
Employee Stock Ownership Plan - Notes
Page 3
The Mortgage Fund is a fund invested under the terms of a group
annuity contract with the Hartford in the Separate Account G
which is a pooled separate account maintained by the Hartford
with respect to a portion of its assets, in connection with the
contract and other similar contracts issued by the Hartford.
The assets in the Separate Account G are invested solely in the
Hartford GNMA/Mortgage Securities Fund. Inc. The Hartford
Investment Management Company is an investment advisor to the
fund. This fund invests in mortgage related securities,
including securities issued by the Government National Mortgage
Association. The Mortgage Fund is valued based on a unit value
as determined by the fund manager as follows:
12/31/93 12/31/92
Unit Value $27.201 $25.706
Total Units Held 7,166.071 5,525.936
The related cost of the Mortgage Fund at December 31, 1993 was
$185,990, and $142,000 at December 31, 1992.
Assets in any of the five funds may be invested in short term
government or other securities pending permanent investment.
Earnings on each fund will be reinvested in that fund.
Each participant is permitted to elect to have his basic
contribution invested in any of the five funds in 10%
increments. As of December 31, 1993 and 1992 the number of
participants by fund were as follows:
1993 1992
C&K Stock Fund 1,240 1,204
Fixed Income Fund 867 861
Equity Fund 312 286
Advisers Fund 102 86
Mortgage Fund 98 90
As of the first day of any month, but not more frequently than
once in any six-month period, a participant may elect to
transfer any part of the value of his basic employee account or
his supplemental employee account, which is invested in one of
the funds, to any of the other funds except the Fixed Income
Fund and the Mortgage Fund. Any such transfer must be in
increments of 5% of the amount invested in the fund from which
the transfer is being made.
3. Income Taxes
The Internal Revenue Service has issued a determination letter
to the effect that the Plan as amended through 1985 is a
qualified plan under Section 401(a) of the Internal Revenue
Code of 1954 (the Code), as amended.
Employee Stock Ownership Plan - Notes
Page 4
Effective as of July 1, 1989, the Board of Directors of the
Corporation amended the Plan to convert it to an employee stock
ownership plan. The amendments to the Plan included both
changes to convert the Plan to an employee stock ownership plan
and other changes required or permitted by the Code.
Management and counsel believe that these amendments will not
effect the qualified status of the Plan.
It is believed that, in general, the Federal income tax
consequences of participation in the Plan under present law
will be as follows:
Participants are not subject to Federal income tax on employer
contributions made under the Plan or on income earned by the
Trust until amounts are withdrawn or distributed. Any
withdrawal from the Plan will be tax free to the extent of the
participant's contributions to the Plan prior to 1987. If the
amount exceeds such pre-1987 contributions of the participant,
the excess will be treated as being in part a tax free return
of the participant's contribution made to the Plan after 1986
and in part as a taxable distribution subject to federal income
tax at ordinary rates based on the ratio at the time of
withdrawal of the total participant's contributions after 1986
to the total value of the participant's accounts. If the
withdrawal or distribution qualifies as a lump sum
distribution, amounts attributable to participation in a
predecessor plan prior to 1974 may qualify for capital gains
treatment (phased out over the years 1987-1991), and the
ordinary income portion attributable to post-1973 participation
may be taxed under a special five-year income averaging
provision if the participant is over age 59 1/2 (or a special
ten-year income averaging provision if the participant turned
50 before January 1, 1986). If a distribution includes shares
of common stock of Crompton & Knowles Corporation, taxation of
any appreciation in the value of such shares over their cost to
the Trust will be deferred until the later sale or exchange of
such shares. Taxable withdrawals or distributions after
January 1, 1987, in addition to being taxed as ordinary income
will be subject to an additional 10% income tax unless the
withdrawal or distribution is on account of the death or
disability of the participant, is made after he turns age 59
1/2 or retires after age 55, or is used for certain deductible
medical expenses. A participant who receives total
distributions from all retirement plans in a single year in
excess of $150,000 ($144,551 in some cases) may be subject to
an excise tax of 15% of the excess amount.
<PAGE>
Employee Stock Ownership Plan - Notes
Page 5
The foregoing is only a brief summary of the tax consequences
of participation in the Plan. Each participant should consult
his own personal advisors with respect to the tax consequences
of making any elections under the Plan and for purposes of
determining his own tax liability.
4. Participant Vesting
A participant in the Plan is fully vested in all of his
accounts under the Plan upon his death, retirement, disability,
or attainment of age 65 or upon change in control of the
Corporation. A participant whose employment terminates for any
reason before his death or retirement is entitled to receive
l00% of his own contributions plus earnings thereon and will
receive his employer contribution account plus earnings thereon
based upon a schedule under which the account is 100% vested
after five years of participation in the Plan, or after
completion of five years of service with the Corporation. The
non-vested portion of the employer contribution account will be
forfeited under certain circumstances and held to reduce future
contributions to be made by the Corporation to the Plan.
5. Investments
A. Unrealized appreciation in Crompton & Knowles
Corporation common stock:
12/31/93 12/31/92 12/31/91
Unrealized
apprec. at the
beginning of
the year $36,989,039 $37,236,932 $12,780,172
Unrealized
apprec. at the
end of the year 31,807,154 36,989,039 37,236,932
Increase/(decrease)
in unrealized
appreciation $(5,181,885) $( 247,893) $24,456,760
<PAGE>
Employee Stock Ownership Plan - Notes
Page 6
B. Net purchases (sales) of shares of Crompton & Knowles
Corporation common stock consist of the following:
Contributions Net
And Sales and Purchases
Purchases Withdrawals (Sales)
1993
No. of shares 131,841 269,060 (137,219)
Cost amount $2,924,833 $1,275,893 $1,648,940
1992
No. of shares 156,816 105,023 51,793
Cost amount $3,062,632 $ 409,398 $2,653,234
1991
No. of shares 53,568 94,669 (41,101)
Cost amount $1,524,738 $ 498,748 $1,025,990
C. Gain on sale of investments and withdrawals of Crompton &
Knowles Common Stock:
1993 1992 1991
Aggregate
proceeds $5,890,730 $2,018,533 $2,586,665
Aggregate cost
(FIFO) 1,275,893 409,398 498,748
Net gain $4,614,837 $1,609,135 $2,087,917
6. Plan Expenses
Significant costs of Plan administration, which are payable
from the Trust or by the Corporation, are generally paid by the
Corporation.
11k93C
Exhibit No. 1 to Form 11-K
11k93D
1
<PAGE>
INDEPENDENT AUDITORS REPORT
The Board of Directors
Crompton & Knowles Corporation:
We have audited the accompanying statements of financial condition
of Crompton & Knowles Corporation Employee Stock Ownership Plan
(the Plan) as of December 31, 1993 and 1992, and the related
statements of income and changes in plan equity for each of the
years in the three-year prior period ended December 31, 1993.
These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the
Plan as of December 31, 1993 and 1992, and the results of its
operations for each of the years in the three-year period ended
December 31, 1993 in conformity with generally accepted accounting
principles.
/S/KPMG Peat
Marwick
Stamford, Connecticut
March 14, 1994
11k93D
2
